China Advanced Construction Materials Group, Inc. (NASDAQ: CADC) ("China ACM"), a leading provider of ready-mix concrete and related technical services in China, today announced it has been awarded three high-speed rail contracts valued at a total of $10.7 million.
All three contracts were awarded to the Company's Manufacturing Services business segment and are being fulfilled with ready-mix concrete (RMC) from its growing fleet of portable plants. The Company targets gross margins of 40 percent to 60 percent for its rapidly growing Manufacturing Services business. This segment reported gross margins of 59 percent and 48 percent, for the three-month and nine-month periods ending March 31, 2010, respectively.
All three contracts were awarded by China Road and Bridge Corporation (CRBC) to provide premium RMC manufacturing services for sections of the Nanjing-Anqing high-speed passenger railway in Anhui Province. They represent a project that, in aggregate, is the largest HSR contract package that China ACM has won to date. All three contracts are scheduled for completion in the first half of 2012.
The first contract is for Part 1, Section NASZ-5, of the Nanjing-Anqing HSR project. It is valued at approximately $4.1 million and will require about 550,000 cubic meters of China ACM premium RMC.
The second contract is for Part 2, Section NASZ-5, of the Nanjing-Anqing HSR project. It is valued at approximately $3.7 million and will require about 500,000 cubic meters of China ACM premium RMC.
The third contract is for Part 4, Section NASZ-5 of the Nanjing-Anqing HSR project. It is valued at approximately $2.9 million and will require about 400,000 cubic meters of the Company's premium RMC.
"The ambitious high speed rail build out in China continues as planned. It is our honor being entrusted to help lay the foundations for a massive publicly funded project catapulting China to the forefront of a global, modernized public infrastructure system," said China ACM Chief Operating Officer Mr. Weili He, who also serves as Vice-Chair of the Beijing Concrete Association. "We are pleased with the confidence numerous HSR contractors, such as China Road and Bridge, place in China ACM."
"As a technologically sophisticated provider of eco-friendly premium blend RMC, China ACM is well positioned to win additional HSR business which provides a sustainable and growing source of revenue," said Jeremy Goodwin, President and Chief Financial Officer of China ACM. "We expect to continue to build on our success -- doing the advanced work to build out the foundation of China's HSR network at the forefront of the Chinese Government's massive, long term infrastructure spend."
China ACM estimates the total addressable market just for HSR RMC at $15 billion over the next 10 years. Analysts report that China's 6,552 km high-speed railway system is the longest in the world, and is expected to double to 13,000 km by 2012. This includes newly built high-speed links and existing track that has been upgraded to accommodate trains running 200-250 km/hour. Over the next 10 years, the Ministry of Railways plans to construct an additional 34,000 km of railway track in the country (more than half of which will be HSR), more closely linking the Central and Western regions to coastal provinces.