CADC

China Advanced Construction Materials Group, Inc. (CADC)

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China Advanced Construction Materials Group (CADC)

F3Q13 Earnings Call

May 16, 2013 8:00 a.m. ET

Executives

Xianfu Han – Chairman and CEO

Weili He – Vice Chairman and COO, Interim CFO

Presentation

Operator

Greetings and welcome to the China Advanced Construction Materials Group Inc. earnings call to report third quarter fiscal year 2013 results. 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 third quarter conference call. I am Jemming Shang, the Board Secretary of China ACM. Before we start, I’d like to remind you that management’s 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, access to capital, 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 May 16, 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. Weili He, Vice Chairman and COO, interim CFO, 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 experienced year over year decrease in revenue growth for the third quarter of fiscal year 2013, this decrease was principally due to the suspension of some plants. In order to curtail future losses we will continue our efforts to improve the collection of the accounts receivables and trying to increase our client base for the rest of the year.

For revenue; our revenue is primarily generated from sales of our advanced ready-mix concrete products and manufacturing services. For the three months ended March 31, 2013, we generated revenue of $7.2 million compared to $18.9 million during the same period in 2012, a decrease of $11.7 million or 61.7%. The decrease in our revenue is due primarily due to decreased revenue from our manufacturing services and concrete sales for the three months ended March 31, 2013.

Our concrete sales revenue was approximately $7.2 million for the three months ended March 31, 2013, a decrease of $10.8 million or 60% from the three months ended March 31, 2012. 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.

Revenue from our manufacturing services segment was $5,616 for the three months ended March 31, 2013, a decrease of $0.85 million, or 99.3%, as compared to the three months ended March 31, 2012. Such decrease in revenue was attributable principally to the suspension of operations of certain of our portable plants during the three months ended March 31, 2013.

Gross Profit. Gross profit was $0.1 million for the three months ended March 31, 2013, as compared to $2.1 million for the three months ended March 31, 2012. Our gross profit for the sale of concrete was $0.6 million, or 9.0% of revenue, for the three months ended March 31, 2013, as compared to $2.6 million, or 15% of revenue, for the same period last year. The decreased gross profit margin reflects lower demand and lower prices for our concrete products in Beijing as compared to the same period last year.

Our gross loss with respect to our manufacturing services segment was $0.6 million for the three months ended March 31, 2013, flat with $0.6 million gross loss for the same period last year.

Provision for doubtful accounts. We incurred provision for doubtful accounts of $1.3 million for the three months ended March 31, 2013, a decrease of $2.3 million, as compared to $3.6 million for the three months ended March 31, 2012. An estimate of doubtful accounts is recorded when collection of the full amount is no longer probable. Known bad debts are written off against allowance for doubtful accounts when identified. The accrual ratio is 5% for accounts receivable past due less than one year, 50% for accounts receivable past due from one to two years and 100% for accounts receivable past due beyond two years.

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