Feb 25 2011
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 two high-speed rail (HSR) contracts valued at $4.1 million total.
The contract was awarded to the Company's Manufacturing Services business segment and is being fulfilled with premium ready-mix concrete (RMC) from two new portable plants. Both these plants were built with machinery that China ACM pre-paid $1.3 million for last year, by directly spending -- or assigning -- $1.3 million of its accounts receivable (AR) balance.
The Company recently reported it has a strong December 31, 2010 financial position with $12 million in short term securities classified as "Investment" which earns seven percent interest and is fully liquid on 15 days notice without penalty.
Both these two new plants were transported, installed and placed into trial production just two months after their assembly and, as is customary, once their trial production met client quality control approval they are officially contracted and placed into full production.
These two new plants bring to 25 the total number of Company portable concrete plants in its Manufacturing Services business, with 21 fully contracted and operating country wide today. The remaining four are in preliminary trial production at client sites awaiting contract finalization which China ACM anticipates announcing in the current or subsequent quarter.
China ACM was awarded the two new contracts by China Communications Construction Company Limited (HKEx: 01800), for its premium RMC manufacturing and related engineering services on the Yunnan -- Guilin Passenger Line located in Pingguo, in the Guangxi Zhuang Province Autonomous Region. These contracts will require approximately 400,000 cubic meters of RMC, valued at $4.1 million, and estimated for completion in June 2013.
China ACM reported a gross margin of 31 percent for its rapidly growing Manufacturing Services business segment, compared with its blended gross margin of 19 percent, in the second fiscal quarter ended Dec. 31, 2010.
Commenting on the contracts, Jeremy Goodwin, President and Chief Financial Officer of China ACM, said, "We continue to grow our high-margin, high speed rail business adding new plants and placing them into service quickly to meet growing demand. Having purchased the machinery for these two new plants with our accounts receivable again demonstrates the liquidity of our $36 million working capital balance. When finalized, we expect China's 12th five-year plan will only lead to an increase in the country's more than USD$1 trillion rail and infrastructure spend, and that is a lot of premium patented, eco-friendly ready mixed concrete."
The Chinese Ministry of Rail has announced its plans to invest $120.75 billion (RMB823.5 billion) in 70 new projects upgrading rail infrastructure in calendar 2010 which together with future planned rail infrastructure investment will total $730 billion (RMB5 trillion) by 2020. China's State Development and Reform Commission recently announced plans to expand China's subway system to 6,100KM investing $105 billion (RMB700 billion) through 2020. According to the Investment Research Institute of China's State Development and Reform Commission, during the 12th 5-year plan from 2011-2015 the Chinese government will invest $450 billion (RMB 3 trillion) in railway and another $460 billion (RMB3.05 trillion) in rural infrastructure.
Source: http://www.china-acm.com/