Oct 27 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 a new $3.5 million high-speed rail (HSR) contract.
The contract was awarded to the Company's Manufacturing Services business segment and is being fulfilled with premium ready-mix concrete (RMC) from a portable plant. China ACM 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.
China ACM was awarded the contracts by China Road and Bridge Corporation, a subsidiary of Beijing-based China Communications Construction Company Limited (HKSE: 1800), for its premium RMC manufacturing and related engineering services on the Datong-XiAn Special Passenger Line, Section 14 in the Shanxi Province. It will require approximately 400,000 cubic meters of RMC and is valued at $3.5 million.
Contract production and revenue recognition began in the first fiscal quarter of 2011 ended September 30, and is estimated for completion in the second quarter of FY 2012 ending Dec. 31, 2011.
Commenting on the contract, Mr. Xianfu Han, Chairman and Chief Executive Officer of China ACM, said, "Growth in China ACM's Manufacturing Services Segment continues to accelerate as China ACM offers a robust and extremely competitive offering with its patented RMC blends, high degree of operational responsiveness and flexibility as well as our expert chemical and technical engineering services.
"The urbanization and modernization driving the China infrastructure build out continues to grow away from the center of Beijing to more distant Beijing City areas, outlying provinces and emerging new cities with new or expanded airports, subway and rail stations, bridges, HSR and complex commercial and industrial buildings," Mr. Han said. "This plays to China ACM's strength with the portable plant model that we envisioned and began to implement years ago."
"With a vast long term trillion-dollar China infrastructure build out underway, led by a massive 10-year HSR investment, we are seeing an increasing number of excellent opportunities available to our Manufacturing Services business," said Jeremy Goodwin, President and Chief Financial Officer of China ACM. "Accordingly, we are in the process of increasing China ACM Manufacturing Services capacity -- to be funded internally or with debt financing -- with new portable plants and fleet vehicles to meet higher levels of anticipated demand."
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.