CADC

China Advanced Construction Materials Group, Inc. (CADC)

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China Advanced Construction Materials Group, Inc. (CADC)

F2Q13 Earnings Call

February 15, 2013 08:00 am ET

Executives

Xianfu Han – Chairman and Chief Executive Officer

Analysts

Presentation

Operator

Greetings and welcome to the China Advanced Construction Materials Group Incorporated Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded.

It is now my pleasure to introduce your host [Jemming Shang]. Thank you miss, you may begin.

Unidentified Company Representative

Thank you. And welcome to China ACM fiscal year 2013 second quarter conference call. I am Jemming Shang, the Board Secretary of China ACM. Before we start, I’d like to remind you that managements prepared remarks contain forward-looking statements that are subject to risk and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore the company claims the protection of the Safe Harbor for forward-looking statement that is contained in the Public Securities Litigation Reform Act of 1995.

Actual results may differ from those discussed today due to such risk facts but not limited to change from anticipated levels of sales, future international or regional economic and a competitive and regulatory condition change in relationships with customers as such to sort out difficulties in developing and marketing new products, marketing existing products, customer acceptance of existing and new products and other factors that may be included in the risk section of our filing with the SEC. Accordingly although the company believes that such expectations reflected in such forward-looking statements are reasonable, there can be no assurance that such expectations will prove to be correct.

In addition, any cost additions as to the Company's future performance represents managements estimates as of today February 15, 2013. We undertake no obligation to correct or update any forward-looking statements provided as a result of new information, further events or even change in our expectations except as required by law.

Joining us on today's call is Mr. Xianfu Han, Chairman and CEO; and Mr. Ken Ren, Independent Director of the Board. Now I have prepared remarks from Mr. Han that has been translated into English and we will now read this on his behalf.

Xianfu Han

Good morning and thank you for joining our call today. Although we're feeling a year-over-year decrease in revenue for the second quarter of fiscal year 2013. Amid this impact from adverse weather, such decrease was principally attributed to lower sales of concrete products due to the slowing down of the housing market and infrastructure developments. In order to curtail future losses, we will continue our efforts to improve the collection of account receivables, optimize our plant network and enhance our client base for the rest of the year.

So revenue; our revenue is primarily generated from sales of our advanced ready-mix concrete products and manufacturing services. For the three months ended December 31, 2012, we generated revenue of $21.6 million compared to $42.6 million during the same period in 2011, a decrease of $21 million or 49%. The decrease in our revenue is due primarily due to decreased revenue from our manufacturing services and concrete sales for the three months ended December 31, 2012.

Our concrete sales revenue was $19.1 million for the three months ended December 31, 2012, a decrease of $20.9 million or 52% from the three months ended December 31, 2011; the decrease in revenues from concrete sales was principally due to the decreased demand of concrete sales in line with slowing down of the housing market and overall economic growth.

China Central government continues to impose restrictions on purchase of residential apartments in order to contain the housing price in China. In addition, China's economic growth has been decelerating in 2012, which has caused adverse impact on construction industry in China.

Revenue from our manufacturing services segment was $2.5 million for the three months ended December 31, 2012, a decrease of $0.1 million or 2% as compared to the three months ended December 31, 2011. Such decrease in revenue was attributable principally to the suspension of operations of certain of our portable plants during the three months ended December 31, 2012, in light of an increase in audit inspections at a high speed rail construction sites around China resulting from the recent heightened public scrutiny of railway safety in China.

So cost of revenue; total cost of revenue, which consists of direct labor, rentals, depreciation, other overhead and the raw materials, including inbound freight charge was approximately $18.4 million for the three months ended December 31, 2012 as compared to approximately $35 million for the three months ended December 31, 2011, a decrease of approximately $16.6 million or 48%. The decrease of cost of revenue was due to the overall decrease in production from our fixed concrete plants in the Beijing area and the decreased production on manufacturing services compared to the three months ended December 31, 2011.

The cost of revenue on concrete decreased approximately $16 million or 49% for the three months ended December 31, 2012 as compared to the three months ended December 31, 2011; such decrease was due to a decrease in our concrete production leading to a smaller base of raw material purchases with lower overall volume of traditional concrete sales.

Cost of revenue with respect to our manufacturing services decreased approximately $0.7 million or 29% during the three months ended December 31, 2012 as compared to the same period during the three months ended December 31, 2011; the decrease in our cost of sales was due to decreased revenue from manufacturing services.

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