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China ACM Reports 116% Increase in Gross Profit and 120% Increase in Operating Income for the Third Quarter of Fiscal 2009

Posted on: Friday, 15 May 2009, 06:00 CDT

Generates Net Income of $2.3 Million or $0.16 per Diluted Share for the Fiscal Third Quarter of 2009

NEW YORK and BEIJING, May 15 /PRNewswire-FirstCall/ -- China Advanced Construction Materials Group, Inc. ("China ACM") (OTC Bulletin Board: CADC), a leading provider of ready-mix concrete in China, today announced financial results for the three months ended March 31, 2009.

Mr. Xianfu Han, Chairman and Chief Executive Officer, stated, "China ACM has continued to experience year-over-year growth in revenue and net income as well as rapid margin expansion. In our fiscal third quarter, revenue increased to $9.3 million from $6.8 million during the comparable period last year, with higher margin manufacturing services and technical services contributing to our growth. As a result, gross margins for our fiscal third quarter increased to 41.9% from 26.5%, and our operating margin increased to 33.2% from 20.6% for the same period last year. Net income for the fiscal third quarter was $2.3 million versus $1.3 million during the fiscal third quarter of 2008. We remain on track to achieve net income of at least $9 million for fiscal 2009."

Mr. Han continued, "The Chinese government announced its $586 billion stimulus package in November of 2008, with much of the money allocated toward infrastructure projects, a key focus of China ACM. Among the many infrastructure projects on the Chinese government's agenda is the building of high speed railways through the year 2020 intended to better service the large population of Chinese citizens located outside major cities. This initiative is expected to consume 120 million tons of cement, as the network of track is set to increase by 41,000 kilometers over the next 11 years at a cost of approximately $730 billion. The Chinese government and many of the large general contractors are long-standing customers of China ACM. As a result, our company is now involved in over six such railway projects, with associated revenue of $19.7 million, in and around the Beijing area, the most recent additions being the Guizhou-Guangzhou Railway and the Jin-Qin High Speed Railway. Our investment in portable concrete facilities, combined with our solid reputation, quality products and services and competitive pricing, have placed us in a strong position to win railway projects and also fits our strategic plan of expanding outside the Beijing area. We continue to bid on projects of this type and have already begun benefiting from the Chinese government's stimulus package."

Revenue for the three months ended March 31, 2009 was $9.3 million, as compared to $6.8 million for the three months ended March 31, 2008. Gross profit was $3.9 million for the three months ended March 31, 2009, as compared to $1.8 million for the three months ended March 31, 2008, representing gross margin of approximately 41.9% and 26.5%, respectively. Net income for the three months ended March 31, 2009 increased to $2.3 million, or $0.16 per diluted share, compared to net income of $1.3 million, or $0.15 per diluted share, for the same quarter last year.

As of March 31, 2009, the company had cash of $870,140, restricted cash of $666,954, working capital of $8.0 million, and no long-term debt.

Conference Call

China ACM will also host a conference call at 8:00 a.m. Eastern Time on Friday, May 15, 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 seven days by calling (201) 612-7415 and entering account #286, ID #323153. 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 BALANCE SHEETS AS OF MARCH 31, 2009 AND JUNE 30, 2008 ASSETS March 31, 2009 June 30, 2008 (Unaudited) RESTATED CURRENT ASSETS: Cash $870,140 $1,910,495 Restricted cash 666,954 913,092 Marketable securities 58,451 61,767 Accounts receivable, net of allowance for doubtful accounts of $357,810 and $224,924 as of March 31, 2009 and June 30, 2008, respectively 14,856,208 9,365,486 Inventories 777,548 237,836 Short term loan receivable 1,465,000 - Other receivables 1,008,368 505,968 Prepayment 3,940,771 3,240,394 Total current assets 23,643,440 16,235,038 PLANT AND EQUIPMENT, net 15,237,656 16,730,220 OTHER ASSETS: Accounts receivable (non-current), net of allowance for doubtful accounts of $664,503 and $411,061 as of March 31, 2009 and June 30, 2008, respectively 7,529,760 4,753,006 Total assets 46,410,856 37,718,264 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short term loans $4,723,893 $4,271,222 Accounts payable 5,875,554 6,293,553 Customer deposits 10,751 165,434 Other payables 280,182 254,259 Other payables - shareholder 763,634 880,302 Accrued liabilities 411,168 145,207 Taxes payable 3,468,297 1,073,237 Interest payable 155,200 - Total current liabilities 15,688,679 13,083,214 COMMITMENTS, CONTINGENCIES, AND SUBSEQUENT EVENT REDEEMABLE PREFERRED STOCK ($0.001 par value, 873,000 and 875,000 shares issued and outstanding) net of discount of $717,822 and $1,168,548 at March 31, 2009 and June 30, 2008, respectively, liquidation preference of $8.00 per share and accrued dividends 6,266,178 5,831,452 SHAREHOLDERS' EQUITY: Preferred stock $0.001 par value, 1,000,000 shares authorized, 873,000 and 875,000 redeemable preferred shares issued and outstanding, and classified above outside shareholders' equity above, liquidation preference of $8.00 per share and accrued dividends as of March 31, 2009 and June 30, 2008 - - Common Stock, $0.001 par value, 74,000,000 shares authorized, 10,508,000 and 10,525,000 shares issued and outstanding, as of March 31, 2009 and June 30, 2008, respectively 10,508 10,525 Paid-in-capital 12,777,188 12,722,260 Contribution receivable (1,210,000) (1,210,000) Retained earnings 8,011,906 3,257,276 Statutory reserves 2,172,408 1,452,779 Accumulated other comprehensive income 2,693,989 2,598,466 Deferred compensation - (27,708) Total shareholders' equity 24,455,999 18,803,598 Total liabilities, redeemable preferred stock, and shareholders' equity $ 46,410,856 $37,718,264

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME FOR THE NINE MONTHS AND THREE MONTHS ENDED MARCH 31, 2009 AND 2008 (UNAUDITED) Nine months ended Three months ended March 31, March 31, 2009 2008 2009 2008 REVENUE: Sales of concrete $16,382,049 $19,841,164 $6,544,484 $6,790,646 Manufacturing services 5,301,154 - 1,304,615 - Technical services 1,471,583 - 431,456 - Mixer rental 1,992,520 - 995,939 - Marketing cooperation 94,167 - 32 - Total revenue 25,241,473 19,841,164 9,276,526 6,790,646 COST OF REVENUE: Cost of concrete 12,147,067 15,538,513 4,592,863 4,988,211 Manufacturing Services 1,803,356 - 510,268 - Technical services 119,742 - 22,059 - Mixer rental 602,485 - 265,442 - Marketing cooperation 38,720 - 13 - Total cost of revenue 14,711,370 15,538,513 5,390,645 4,988,211 GROSS PROFIT 10,530,103 4,302,651 3,885,881 1,802,435 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 2,079,257 1,033,958 809,777 404,692 INCOME FROM OPERATIONS 8,450,846 3,268,693 3,076,104 1,397,743 OTHER (EXPENSE) INCOME, NET Other subsidy income 1,300,992 1,190,159 470,971 407,434 Non-operating expense, net (201,531) (36,655) (118,343) (9,264) Interest income 4,777 - 937 - Interest expense (640,544) (215,532) (194,200) (67,963) Total other income, net 463,694 937,972 159,365 330,207 INCOME BEFORE PROVISION FOR INCOME TAXES 8,914,540 4,206,665 3,235,469 1,727,950 PROVISION FOR INCOME TAXES 2,516,707 422,521 941,477 422,521 NET INCOME 6,397,833 3,784,144 2,293,992 1,305,429 Dividends and accretion on redeemable preferred stock 923,575 - 305,443 - Net income available to common shareholders 5,474,258 3,784,144 1,988,549 1,305,429 RECONCILIATION OF COMPREHENSIVE INCOME: Net income 6,397,833 3,784,144 2,293,992 1,305,429 Unrealized (loss) gain from marketable securities (3,316) 5,223 15,901 (18,220) Foreign currency translation adjustment 98,839 1,539,290 (39,340) 644,374 COMPREHENSIVE INCOME $6,493,356 $5,328,657 $2,270,553 $1,931,583 EARNING PER SHARE: Basic $0.52 $0.43 $0.19 $0.15 Diluted $0.46 $0.43 $0.16 $0.15 WEIGHTED AVERAGE NUMBER OF SHARES: Basic 10,525,066 8,809,583 10,525,200 8,809,583 Diluted 14,024,081 8,809,583 14,021,832 8,809,583

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 2009 AND 2008 (UNAUDITED) 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $6,397,833 $3,784,144 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation 1,611,255 815,689 Stock-based compensation expense 66,619 - Bad debt expense 383,581 3,136 Changes in operating assets and liabilities Accounts receivable (14,505,340) 7,298,441 Inventories (538,551) 32,838 Other receivables (998,078) 703,888 Other receivables - related parties - (218) Prepayment (83,374) (328,836) Accounts payable 5,365,721 (9,139,259) Other payables 25,142 363,910 Accrued liabilities 265,272 (94,066) Customer deposits (155,310) - Taxes payable 2,389,830 385,422 Net cash provided by operating activities 224,600 3,825,089 CASH FLOWS FROM INVESTING ACTIVITIES: Disbursement on short term loan (1,464,500) Purchase of equipment (50,423) (15,665) Net cash used in investing activities (1,514,923) (15,665) CASH FLOWS FINANCING ACTIVITIES: Principal payments of short term loan (6,961,984) (5,679,400) Proceeds from short term loan 7,398,231 3,404,168 Other payables - shareholders (117,160) - Preferred dividends paid (317,649) - Restricted cash 246,138 751,000 Net cash provided by (used in) financing activities 247,576 (1,524,232) EFFECTS OF EXCHANGE RATE CHANGE IN CASH 2,392 125,468 DECREASE (INCREASE) IN CASH (1,040,355) 2,410,660 CASH, beginning of period 1,910,495 1,424,883 CASH, end of period $870,140 $3,835,543

SOURCE China Advanced Construction Materials Group, Inc.

Source: PR Newswire

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