Oct 20 2010
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 a total of $8.4 million.
Both contracts were awarded to the Company's Manufacturing Services business segment and are being fulfilled with premium ready-mix concrete (RMC) from two portable plants. It targets gross margins of 40 percent to 60 percent for its rapidly growing Manufacturing Services business, compared with the 20.8 percent Company blended gross margin it recently reported for its 2010 fiscal year ended June 30. In that report, the Company announced Manufacturing Services revenue for the fourth quarter of FY 2010 increased by 193 percent to a record $5.1 million, year over year, with a 45.7 percent gross margin.
China ACM was awarded the contracts by Beijing-based China Railway Construction, Ltd. (HKSE: 1186) (SHSE: 601186) (PINKSHEETS: CWYCF) (PINKSHEETS: CWYCY) to provide its premium RMC manufacturing and related engineering services for the Hangzhou-Changsha Railway Passenger Line.
The first contract is for Section 2 of the Hangzhou-Changsha Passenger Rail project in Zhejiang Province. It is valued at approximately $6.2 million and will require about 700,000 cubic meters of China ACM premium RMC.
The second contract is also for Section 2 of the Hangzhou-Changsha Passenger Rail project in Zhejiang Province. It is valued at approximately $2.2 million and will require about 300,000 cubic meters of China ACM premium RMC.
Production and revenue recognition for both contracts are expected to begin in the first half of Fiscal Year 2011, and are projected to be completed in the first half of FY 2013 ending December 31, 2012.
"On top of our record $10.7 million Nanjing-Anqing HSR contract package in Anhui Province we announced last month, these Hangzhou-to-Changsha HSR contracts demonstrate our ability to win the big wins," said China ACM Chief Operating Officer Weili He. Mr. He also serves as Vice-Chair of the Beijing Concrete Association. "The blending, delivery and application of our patented RMC for high speed rail and other complex architectural projects requires highly specialized chemical engineering expertise. The prime contractors of these projects demand the best product, technical and engineering consulting. We are honored by the confidence placed in China ACM by China Rail Construction and our many other clients."
Commenting on the HSR contracts, Jeremy Goodwin, President and Chief Financial Officer of China ACM, said, "China ACM is confident our accelerating growth in Manufacturing Services will fund substantially increased new HSR business in the year ahead."
"The recent HSR contract wins solidify China ACM's position as a leading subcontractor for projects with the most demanding premium RMC engineering requirements. HSR is a crucial early component of a massive, generational China infrastructure build out that will enable the most dramatic society urbanization and modernization in history," Mr. Goodwin added. "These contracts raise our profile throughout the industry worldwide as a U.S. publicly traded, diversified China infrastructure pure play."
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 the end of 2012. This includes newly built high-speed links and existing track that will be 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.
Source: http://www.china-acm.com/