BEIJING, May 6, 2011 /PRNewswire-Asia/ -- China Infrastructure Construction Corporation (OTC Bulletin Board: CHNC.OB) ("CHNC" or the "Company"), a major U.S.-listed provider of ready-mix concrete headquartered in Beijing, today announced its financial results for the third fiscal quarter ended February 28, 2011. Summary financial data is provided below:
Third Quarter Fiscal 2011 Financial Highlights
Nine Months Financial Highlights
Mr. Yang Rong, Chairman and CEO of CHNC, stated, "We needed additional time to re-examine our accounts receivable and as a result were unable to file our quarterly report in a timely manner. After careful consideration, we decided to make the provision for bad debt related to our accounts receivable in the amount of approximately $8.0 million. Notwithstanding that we do intend to collect the respective accounts receivable, we believe it is our obligation to make this provision in our financial statements. We plan to remedy the timely collection of our accounts receivable by increasing our focus on contractual obligations reflecting shorter payment terms and by stepping up our efforts in collecting accounts receivable."
On the company's operation, Mr. Yang Rong continued to state: "Our growth strategy continues to prove successful, as evidenced by our strong third quarter performance. Our geographic expansion into Xi'an and Tangshan led to robust year-over-year revenue growth. The shift in our business model from only supplying concrete to including manufacturing services and technical services with a higher margin continued to result in improved profitability. With the Chinese government ramping up its efforts to modernize the nation's infrastructure and double-digit industry growth expected over the next several years, we will continue our focus on infrastructure projects such as highways and high speed railway. We believe this focus will put us on strong footing to continue our growth."
Third Quarter Results of Operations
Revenues
Revenues for the three months ended February 28, 2011 were $20.78 million as compared to $20.25 million for the three months ended February 28, 2010. The increase of $533,940 or 2.64% is mainly attributable to the production increase in Xi'an and the revenue from our Shidu facility and also the revenue from technical service but offset by projection decrease at our Tangshang (Jiahua) facility, which completed the project in Tangshang and stopped production, the equipment of which has been relocated to our Caofeidian facility. The revenue increase is further offset by the gradual change of the business model in our Caofeidian facility and Shidu facility from supplying concrete to providing manufacturing service, by which our general contractors supply the needed raw materials. The business model change in Caofeidian started in March 2010 and starting from 2011 Caofeidian facility only provides the manufacturing service. The business change in Shidu facility took place in October 2010 when it switched to providing only manufacturing service.
Gross Profit
Gross profit for the three months ended February 28, 2011 was $8.52 million as compared to $3.78 million for the three months ended February 28, 2010. The increase of $4.75 million, or 125.63%, was primarily due to the decrease of the cost of goods sold due to the business mix changes including more manufacturing service and technical services, and vertical integration with sand and stone operation. Gross profit margin for the three months ended February 28, 2011 was 41.01%, compared to 18.66% for the same period last year.
Income from Operations
Our operating loss for the three months ended February 28, 2011 was $1.56 million, as compared to the operating income of $3.01 million for the same period last year. The increased loss was due to the increased General and Administrative Expenses, which was resulted from the provision for bad debt of $8.02 million, offset by the increased sales revenue as a result of our business expansion as well as our transition towards the business of a higher profit margin.
Net Income
Net loss attributable to CHNC for the three months ended February 28, 2011 was $1.67 million, as compared to a net income $3.23 million for the same period last year. The net loss was primarily due to the charge of $8,016,081 as provision for bad debt on accounts receivable offset by the increased sales as a result of our expansion towards business of a higher profit margin.
Results of Operations for the Nine Months Ended February 28, 2011
Revenues
Revenues for the nine months ended February 28, 2011 were $67.90 million as compared to $51.66 million for the nine months ended February 28, 2010. The increase of $16.24 million, or 31.44%, was primarily due to the Company's geographic expansion into Xi'an and Shidu in 2010. The increase was also attributable to technical services the Company provided to a Tianjin concrete producer in March 2010.
Gross Profit
Gross profit for the nine months ended February 28, 2011 was $21.88 million, as compared to $10.68 million for the six months ended February 28, 2010. The increase of $11.20 million or approximately 104.82% was primarily attributable to increased sales from the Company's geographic expansion, as well as the Company's expansion into the technical services sector and vertical integration with the sand and stone mining operations. Gross profit margin for the nine months ended February 28, 2011 was 32.23%, compared to 20.68% for the same period last year.
Income from Operations
Operation income for the nine months ended February 28, 2011 was $8.51 million, an increase of $27.77 million, as compared to operating loss of $19.26 million for the same period last year. The increased income was due to the increased sales revenue as a result of the company's geographic expansion and transition towards the business with higher profit margin. In addition, the one-time non-cash compensation expenses of $27.42 million were included in the general and administrative expenses for the nine months ended February 28, 2010.
Net Income
Net income attributable to CHNC for the nine months ended February 28, 2011 was $7.19 million, as compared to a net loss of $19.33 million for the same period last year. The increase of $26.52 million was primarily due to increased sales as a result of the company's geographical expansion and the transition towards business of a higher profit margin. In addition, the one-time non-cash compensation expenses of $27.42 million were included in the general and administrative expenses for the nine months ended February 28, 2010.
Liquidity and Capital Resources
As of February 28, 2011, the Company's current assets were $58.85 million and current liabilities were $21.97 million. Cash and cash equivalents totaled $351,016 as of February 28, 2011, compared to $1.87 million as of February 28, 2010. The Company's shareholders' equity at February 28, 2011 was $58.09 million. The Company generated $590,596 in cash from operating activities for the nine months ended February 28, 2011, compared to $7.98 million net cash used in operating activities for the same period last year. The Company generated $609,897 from investing activities for the nine months ended February 28, 2011, compared to $1.21 million net cash used in investing activities for the same period in 2010. Net cash used in financing activities was $1.98 million for the nine months ended February 28, 2011, compared to $10.13 million net cash provided by financing activities for the same period a year ago.
About China Infrastructure Construction Corporation
CHNC was founded in 2002 in Beijing, China. Since then it has developed into one of the top ready-mix concrete producers in Beijing. The Company's products are environmentally friendly, as CHNC is a provider of "green" concrete in China.
Currently, the Company operates four production facilities and eight production lines with a total operating capacity of 3.5 million cubic meters based on its historical utilization rate. CHNC's production facilities are located in Beijing's Nanhaizi area, on the west side of the Yizhuang Economic Development Zone south of Beijing; the Shidu area, within the boundaries of the Zhangfang and Beijing Fangshan district; the Tangshan Development Zone, about 200 kilometers east of Beijing; and Xi'an, Shaanxi Province.
CHNC is a leader in China's "green concrete" movement, referring to the increased use of environmentally friendly and recycled materials in ready-mix concrete by reducing energy and raw material consumption during production, and by mixing and recycling various industrial wastes to create a more sustainable product.
All of CHNC's products have passed the ISO 9001:2005 Certification Quality System and Integrated Certification System, including the Quality Management System Certification, Environmental Management System Certification and Occupational Health and Safety Management System Certification issued by the Beijing Zhong Jian Xie Certification Centre.
CHNC's major projects include the Beijing World Trade Central Business District project and the Beijing Wangjing International Mansion.
Forward-looking Statements
Certain statements made in this news release, may contain forward-looking statements concerning the Company's business and products. These statements include, without limitation, statements regarding our ability to prepare the Company for growth, the Company's planned capacity expansion and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs, but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. These factors may include, but are not limited to, such factors as unanticipated changes in product demand especially in the infrastructure construction industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large-scale implementation of the Company's business plan, the ability to attract new customers, ability to increase its products' applications, cost of raw materials, downturns in the Chinese economy, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.
