Earnings Recap: China Advanced Construction Materials Group Reports 169% Increase in Gross Profit and 194% Increase in Operating Income for the Second Quarter of Fiscal 2009

Thursday, March 19, 2009, 7:04 PM ET -

Generates Net Income of $2.6 Million or $0.19 per Diluted Share for the Fiscal Second Quarter of 2009

NEW YORK AND BEIJING, Feb. 13 /PRNewswire-FirstCall/ -- China Advanced Construction Materials Group, Inc. ('China ACM') (OTCBB: CADC), a leading provider of ready-mix concrete in China, today announced financial results for the three months ended December 31, 2008.

Mr. Xianfu Han, Chairman and Chief Executive Officer, stated, 'We are pleased to report that China ACM continues to thrive despite a challenging global economic environment, as evidenced by the 169% increase in gross profit and 194% increase in operating income for the second quarter of fiscal 2009. We attribute these strong results to a combination of favorable macro infrastructure trends within China, company-specific initiatives and a high standard of excellence in our ready-mix concrete and related services. As expected, our revenue rebounded, increasing 53% over the same period last year, as the government lifted its construction bans related to the Olympics in and around Beijing. Additionally, we signed a number of new contracts during the second quarter and our sales pipeline is extremely robust.'

'China ACM is one of only a few concrete companies in China with the necessary permits and experience to produce ready-mix concrete according to the new government standards for major infrastructure projects. With China's recently announced $586 billion stimulus package primarily designated for infrastructure development, we believe that China ACM will be a major beneficiary of the government's initiatives as the country enhances its roads, railways, airports and other infrastructure. Approximately 75% of China ACM's revenue is derived from government infrastructure projects and we have recently begun expanding our operations outside of the Beijing area to better capitalize on our relationships with general contractors active in other provinces and inter-provincial infrastructure projects such as the Beijing to Shijiazhuang railway.'

Mr. Han continued, 'During the fiscal second quarter, our gross margin increased to 36.5% from 20.8%, and our operating margin increased to 30.9% from 16.1% for the same period last year. Our improved margins were a direct result of the deliberate increase in manufacturing services agreements, technical services agreements, and marketing cooperation agreements, which now comprise 38% of our revenue. Through these agreements, we provide mixed of equipments, oversight, transportation, and consulting services to third-party concrete manufacturers, who in turn supply our proprietary concrete to China ACM customers. This strategy allows us to cost effectively expand our geographic presence without the upfront capital expenditures. These services produce higher margins than our traditional ready-mix concrete business and our strategy is to have these services comprise a larger portion of our overall revenue, going forward.'

Mr. Han continued, 'We continued work on the East Datong to Gudian railway and the Beijing to Shanghai high-speed railroad, providing substantial quantities of ready-mix concrete this quarter for our manufacturing services. Based on our current financial results and expected future contract revenues, we are confident that we will achieve a net income of at least $9 million for fiscal 2009, after adjusting for certain transaction-related charges and expenses.'

Mr. Han concluded, 'We are proud of the reputation China ACM has built over the past six years among our customers, construction companies, general contractors, engineers and the Chinese government. We look forward to our continued participation in China's most important and prestigious infrastructure projects and providing ever-increasing value to our shareholders.'

Revenue for the three months ended December 31, 2008 was $10.8 million, as compared to $7.1 million for the three months ended December 31, 2007. Gross profit was $4.0 million for the three months ended December 31, 2008, as compared to $1.5 million for the three months ended December 31, 2007, representing gross margin of approximately 36.5% and 20.8%, respectively. Net income for the three months ended December 31, 2008 increased to $2.6 million, or $0.19 per diluted share, compared to net income of $1.5 million, or $0.17 per diluted share, for the same quarter last year. Net income for the three months ended December 31, 2008 included a 25% income tax that the company became subject to starting January 1, 2008 and did not incur in 2007.

As of December 31, 2008, the company had cash and cash equivalents of $3.2 million, restricted cash of $881,484 and working capital of $6.7 million.

Conference Call

China ACM will also host a conference call at 8:00 a.m. Eastern Time on Friday, February 13, 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 one month by calling (201) 612-7415 and entering account #286, ID #312978. 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

(tables follow)

                               CONSOLIDATED BALANCE SHEETS
                          AS OF DECEMBER 31 AND JUNE 30, 2008

                                          ASSETS
                                          ------

                                       December 31, 2008      June 30, 2008
                                          (Unaudited)            RESTATED

     CURRENT ASSETS:
       Cash                                 $3,225,178           $1,910,495
       Restricted cash                         881,484              913,092
       Marketable securities                    42,829               61,767
       Accounts receivable, net
        of allowance for doubtful
        accounts of $273,787
          and $224,924 as of
           December 31, 2008 and
           June 30, 2008,
           respectively                     11,919,751            9,365,486
       Inventories                           1,102,088              237,836
       Other receivables                       717,903              505,968
       Prepayment                            3,706,629            3,240,394
         Total current assets               21,595,862           16,235,038

     PLANT AND EQUIPMENT, net               15,780,128           16,730,220

     OTHER ASSETS:
       Accounts receivable
        (non-current), net of
        allowance for doubtful
        accounts of
        $508,462 and $411,061
    as of December 31, 2008 and
     June 30, 2008, respectively             6,057,289            4,753,006

           Total assets                    $43,433,279          $37,718,264

                          LIABILITIES AND SHAREHOLDERS' EQUITY
                          ------------------------------------

     CURRENT LIABILITIES:
       Accounts payable                     $5,665,840           $6,293,553
       Customer deposits                       164,104              165,434
       Short term loans                      4,899,047            4,271,222
       Other payables                          311,289              254,259
       Other payables - shareholder            837,641              880,302
       Accrued liabilities                     313,120              145,207
       Taxes payable                         2,673,051            1,073,237
         Total current liabilities          14,864,092           13,083,214

           Total liabilities               $14,864,092          $13,083,214

     COMMITMENTS, CONTINGENCIES, AND
     SUBSEQUENT EVENT                                -                    -

     REDEEMABLE PREFERRED STOCK ($0.001
      par value, 875,000 shares issued)
      net of discount
        of $868,064 and $1,168,548 at
        December 31, 2008 and June 30,
        2008, respectively,                  6,131,936            5,831,452
        no liquidation preference

     SHAREHOLDERS' EQUITY:
       Preferred stock $0.001 par value,
        1,000,000 shares authorized,
        875,000 redeemable
         preferred shares issued and
          outstanding in 2008, and
          classified above
         outside shareholders' equity
          above, no liquidation preference           -                    -
       Common Stock, $0.001 par value,
        74,000,000 shares authorized,
         10,525,000 shares issued and
          outstanding, respectively             10,525               10,525
       Paid-in-capital                      12,723,533           12,722,260
       Contribution receivable              (1,210,000)          (1,210,000)
       Retained earnings                     6,283,769            3,257,276
       Statutory reserves                    1,911,996            1,452,779
       Accumulated other comprehensive
        income                               2,717,428            2,598,466
       Deferred compensation                         -             (27,708)
         Total shareholders' equity         22,437,251           18,803,598
           Total liabilities, redeemable
            preferred stock, and
            shareholders' equity           $43,433,279          $37,718,264

           CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
      FOR THE SIXTH MONTHS AND THREE MONTHS ENDED DECEMBER 31, 2008 AND 2007
                                    (UNAUDITED)

                                Six months ended         Three months ended
                                   December 31,             December 31,
                                 2008        2007         2008        2007
     REVENUE:
        Sales of concrete    $9,837,565  $13,050,518  $7,969,878  $7,068,849
        Manufacturing
         services             3,996,539            -   2,070,996           -
        Technical
         services             1,040,127            -     423,330           -
        Mixer rental            996,581            -     339,767           -
        Marketing
         cooperation             94,135            -      24,230           -
          Total revenue      15,964,947   13,050,518  10,828,201   7,068,849

     COST OF REVENUE:
        Cost of concrete      7,554,204   10,550,302   5,993,897   5,599,431
        Manufacturing
         services             1,293,088            -     795,880           -
        Technical
         services                97,683            -      29,781           -
        Mixer rental            337,043            -      44,998           -
        Marketing
         cooperation             38,707            -       7,837           -
          Total cost of
           revenue            9,320,725   10,550,302   6,872,393   5,599,431

     GROSS PROFIT             6,644,222    2,500,216   3,955,808   1,469,418

      SELLING, GENERAL AND
      ADMINISTRATIVE
      EXPENSES                1,269,480      629,266     612,371     330,291

     INCOME FROM
     OPERATIONS               5,374,742    1,870,950   3,343,437   1,139,127

     OTHER (EXPENSE)
     INCOME, NET
        Other subsidy
         income                 830,021      782,725     602,427     424,010
        Non-operating
         income
         (expense), net         (83,188)     (27,391)    (85,295)    (12,682)
        Interest income           3,840            -       2,406      (1,196)
        Interest expense       (446,344)    (147,569)   (217,570)    (63,029)
           Total other
            income, net         304,329      607,765     301,968     347,103

     INCOME BEFORE
     PROVISION FOR
     INCOME TAXES             5,679,071    2,478,715   3,645,405   1,486,230

     PROVISION FOR INCOME
     TAXES                    1,575,230            -   1,000,403           -

     NET INCOME               4,103,841    2,478,715   2,645,002   1,486,230

     Dividends and
      accretion on
      redeemable
      preferred stock           618,132            -     309,036           -

     Net income available
      to common
      shareholders            3,485,709    2,478,715   2,335,966   1,486,230

     RECONCILIATION OF
     COMPREHENSIVE
     INCOME:
       Net income             4,103,841    2,478,715   2,645,002   1,486,230
       Unrealized (loss)
        gain from
        marketable
        securities              (19,217)      23,443      (5,876)     (4,084)
       Foreign currency
        translation
        adjustment              138,179      559,325      74,755     386,510

     COMPREHENSIVE INCOME    $4,222,803   $3,061,483  $2,713,881  $1,868,656

     EARNING PER SHARE
       Basic
         Weighted average
         number of shares    10,525,000    8,809,583  10,525,000   8,809,583
         Earning per share        $0.33        $0.28       $0.22       $0.17

       Diluted
         Weighted average
         number of shares    14,220,410    8,809,583  14,220,410   8,809,583
         Earning per share        $0.29        $0.28       $0.19       $0.17

                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE SIX MONTHS ENDED DECEMBER 31, 2008 AND 2007
                                    (UNAUDITED)

                                                   2008              2007
     CASH FLOWS FROM OPERATING ACTIVITIES:
       Net income                                $4,103,841      $2,478,715
       Adjustments to reconcile net income
        to cash
         (used in) provided by operating
          activities:
           Depreciation                           1,071,362         544,359
           Stock-based compensation expense          26,210               -
           Amortization of deferred
            compensation expense                      2,771               -
           Bad debt expense                         142,485           3,089
         Changes in operating assets and
          liabilities
           Accounts receivable                   (8,111,508)      6,003,336
           Inventories                             (861,184)         56,148
           Other receivables                       (208,733)        962,577
           Other receivables - related parties            -      (3,903,903)
           Prepayment                               155,626          (4,564)
           Accounts payable                       2,931,338      (4,788,317)
           Other payables                            55,886         159,128
           Accrued liabilities                      166,881          (1,488)
           Customer deposits                         (2,232)              -
           Taxes payable                          1,590,669            (630)
             Net cash provided by operating
              activities                          1,063,412       1,508,450

     CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchase of plant and equipment              (31,666)        (11,385)
             Net cash used in investing
              activities                            (31,666)        (11,385)

     CASH FLOWS FINANCING ACTIVITIES:
       Principal payments of short term
        loan                                     (6,749,544)      3,031,400)
       Proceeds from short term loan              7,354,278         644,648
       Other payables - shareholders                (43,282)              -
       Preferred dividends paid                    (317,648)              -
       Restricted cash                               31,608               -
             Net cash provided by (used in)
              financing activities                  275,412      (2,386,752)

     EFFECTS OF EXCHANGE RATE CHANGE IN
      CASH                                            7,525           2,391

     INCREASE (DECREASE) IN CASH                  1,314,683        (887,296)

     CASH, beginning of period                    1,910,495       1,424,883

     CASH, end of period                         $3,225,178        $537,587

SOURCE China Advanced Construction Materials Group, Inc.