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Press release from CNW Group

Boyuan Reports First Quarter FY2013 Financial Results

Tuesday, December 18, 2012

Boyuan Reports First Quarter FY2013 Financial Results07:28 EST Tuesday, December 18, 2012TORONTO, Dec. 18, 2012 /CNW/ - Boyuan Construction Group, Inc., TSX: BOY, BOY.DB, BOY.DB.A) a fast-growing construction company in China of commercial, residential and municipal infrastructure projects, reported today its financial results for the three month period ended September 30, 2012.  All figures are in U.S. dollars unless otherwise stated.Selected Fiscal Year Financial HighlightsIn thousands except share and % dataQ1 FY2013Q1 FY2012ChangeRevenue$52,096$53,335-2.3%Gross profit$7,814$7,974-2.0%Gross profit margins15.0%15.0% EBITDA1$6,701$7,078-5.3%Net income$2,688$2,828-5.0%Earnings per share - diluted$0.10$0.12-16.7% Sept. 30, 2012June 30, 2012 Total Assets$181,318$172,685+5.0%Cash, cash equivalents and restricted cash$8,593$11,081-22.5%"Our first quarter results were impacted by the restrictive measures imposed by the central government on the residential market and the tightening of financing facilities to property developers," said Mr. Cai Liang Shou, Chairman of Boyuan Construction Group.  "We believe this situation will continue in the short term and therefore we will continue to be very selective in choosing which new construction projects we accept in order to minimize risk and to preserve capital. Over the longer term, we are still confident that our growth will be driven by expanding our reach in tier-two cities and increasing our focus on specialty construction projects, which we believe will result in higher profit margins."Q1 FY2013 Operational and Financial HighlightsRevenue of $52.1 million, down 2% from $53.3 million in Q1 FY2012EBITDA of $6.7 million, down 5% from $7.1 million in Q1 FY2012Net income of $2.7 million, down 5% from $2.8 million in Q1 FY2012Initiated a residential construction project located in Hainan Lingshui County, a new market, valued at $29.3 millionInitiated a commercial construction project located in Hiayan County, Jiaxing, a core market, valued at $6.0 millionAppointed Mr. John (Jack) Duffy to the board of directors and as a member of the Audit Committee_____________________________________1  EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a defined performance measure under IFRS.Review of Financial ResultsRevenue for the three-month period ended September 30, 2012 was $52.1 million, down 2.3% from $53.3 million for Q1 FY2012.  Boyuan recognizes revenue on the percentage-of-completion method.The measures introduced by the Chinese central government last year in an effort to cool down the real estate market have had an adverse effect on business activities. The Company has also become more selective in taking up new construction projects under the current uncertain economic environment.Cost of construction for Q1 FY2013 was $44.3 million, down 2.4% from $45.4 million for Q1 FY2012. Cost of construction includes all direct material, labor, subcontract and other related costs, such as equipment repairs. The two major components of the cost of construction are direct material and labour costs. Direct material costs were $32.7 million and labour costs were $11.1 million in this quarter. In comparison, direct material costs and labour costs were $33.6 million and $10.9 million in the same quarter last year.Gross profit for Q1 FY2013 was $7.8 million, which represented a margin of 15.0% on revenue. Gross profit for Q1 FY2012 was $8.0 million, which represented a margin of 15.0% on revenue. The Company has experienced a slight downward pressure on margins as a result of the current real estate market situation in China. Developers are becoming more price sensitive and have longer development cycles. Historically, Boyuan's gross profit margins have been in the range of 15% to 17%.G&A expenses were $1.1 million in Q1 FY2013 compared to $0.9 million in the first quarter of FY2012.  The increase in G&A expenses were a result of the Company strengthening its management team.Interest expense for Q1 FY2013 was $1.9 million, an increase of $0.3 million over last year.  The increase was primarily due to an increase in borrowing as a result of longer payment cycles from customers.  The average interest rates for bank loans were also higher in this period due to the generally tight liquidity situation in the PRC.There was no minimum total return (MTR) charge in this quarter. The Company incurred a MTR charge of $0.6 million for the same quarter last year.After-tax net income for Q1 FY2013 was $2.7 million, or $0.10 per fully diluted share, compared to net income of $2.8 million, or $0.12 per fully diluted share, for Q1 FY2012.   The decrease was principally due to increases in amortization and interest expenses.The Company had working capital of $55.9 million, including cash, cash equivalents and restricted cash of $8.6 million for the period ended September 30, 2012. This compares to $54.1 million and $11.1 million, respectively, at June 30, 2012.Boyuan's consolidated statements for the three and 12-month periods ended June 30, 2012 and related management's discussion and analysis (MD&A) will be filed with securities regulatory authorities within applicable timelines and will be available via SEDAR at www.sedar.com.Conference Call NoticeDue to the timing of the recently released annual statements and subsequent conference call, Boyuan will not be holding a conference call to discuss its first quarter fiscal 2013 financial results.  The Company expects to recommence its usual policy of holding conference calls to discuss its financial results for its second quarter fiscal 2013 results.About Boyuan Construction Group, Inc.Based in Jiaxing City, China, Boyuan Construction Group, Inc. is in the business of commercial building and residential construction, municipal infrastructure and engineering projects.  In its last three fiscal years ending June 30, 2012, Boyuan completed more than 50 projects for a number of private and public sector clients.  Boyuan's current project backlog includes residential, commercial, industrial and mixed-use developments.  From its operating bases in Zhejiang Province and in Hainan Province, Boyuan focuses on construction projects in China's fast-growing regions of the Yangtze River Delta, Hainan Province and Shandong Province. For more information visit www.boyuangroup.com.Caution Regarding Forward-Looking Information:Certain information contained in this press release constitutes forward-looking information, which is information relating to future events or the Company's future performance and which is inherently uncertain.  Forward-looking information involves known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information.  The Company believes the expectations reflected in the forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and readers are cautioned not to place undue reliance on forward-looking information contained in this press release.  Some of the risks and other factors which could cause results to differ materially from those expressed in the forward-looking information contained in this press release have been identified in the Company's AIF for the fiscal year ended June 30, 2012 and in the Company's other public disclosure documents filed with certain Canadian securities regulatory authorities and available at www.sedar.com.  The forward-looking information contained in this press release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, except as otherwise required by law.  SOURCE: Boyuan Construction Group, Inc.For further information: Contacts Boyuan Construction Group, Inc. Mr. Paul Law, CFO +(852) 9329 5088 paullaw@zjboyuan.com.cn      TMX Equicom Philip Dale (416) 815 0700 ext. 253 pdale@tmxequicom.com