Building The World’s Fastest Growing Economy

Concrete is truly an amazing product. Its use in construction was first popularized during the Roman Empire. Concrete’s impact was so profound it spawned its own renaissance.

The Roman Architectural Revolution was built on the versatility of concrete. No longer were architects and builders constrained by brick and stone. The miracle product, concrete, allowed for larger more structurally complex buildings.

There aren’t a lot of products that have persisted for millennia… and hunger for this commodity has only become more ravenous.

You’re probably surrounded by concrete right now. It’s in your home’s foundation, or your office walls. The world is practically wrapped in it. The US alone has more than 55,000 miles of highway paved with the stuff.

One country’s massive hunger for concrete puts everyone else to shame. You probably guessed it already – China.

In 2009 China consumed approximately 1.4 billion metric tons of concrete. That accounts for half of the world’s total consumption.

You see the opportunity as clearly as we do… so we’ve uncovered a Chinese concrete company that’s a major supplier in China.

Many world famous structures began life in their plants. Iconic architectural achievements such as the Olympic Stadium Bird’s Nest, Beijing International Airport, and the country’s massive 30,000 km high speed rail expansion.

The company we uncovered is Chinese Advanced Construction Materials (CADC).

 

ABOUT CHINESE ADVANCED CONSTRUCTION MATERIALS

There are four state owned conglomerates that dominate China’s ready-mix concrete (RMC) market. They are all CADC clients. The company is also one of only three Chinese RMC producers that are publicly traded.

China Advanced Materials has four plants in Beijing. One they own and three they lease. All of these facilities have formulation, production, and transportation capabilities.

There is of course a drawback with large fixed facilities for concrete production. The transportation and setting of concrete has to be accomplished within 90 minutes or the mixture will begin to harden. That means the plants are restricted to projects within a 25 km radius.

That’s why CADC put an emphasis on portable RMC facilities. The company currently has 24 rapid assembly and deployment batching plants in the field.

Talk about a strategic advantage…

No longer are projects constrained by geographical distance. Plus the specifications and mixtures can be easily tweaked for every project’s unique needs.

Concrete is highly engineered, and proprietary formulas are closely guarded secrets.

It helps set CADC apart from the competition.

They can compete on price, but when it comes to construction materials cheaper isn’t always better.

CADC’s track record, experience, and production capabilities are what landed them so many high profile contracts.

 

WHY CADC? WHY NOW?

China Advanced Construction Materials has a couple of big advantages in the concrete market.

First, the market sees their proprietary concrete formulas as a better product. Their eco-friendly RMC product has a projected life span of 100 years. That’s double the Chinese national average of 50 for conventional concrete.

Second, they are one of only a handful of Chinese concrete companies that have reached significant economies of scale. And in the concrete biz size and infrastructure makes all the difference.

CADC has put a lot of R&D into their green concrete formulas as well as production. Of the 2,400 concrete producers in China only China Advanced Construction Material and 9 others are certified as green.

What’s the key to their green concrete? It’s their aggressive use of recycled waste material, their low energy use at production, plus initiatives designed to cut down on dust and air pollutants.

The big emphasis on green concrete production in China began in 2004.

That year the Chinese government issued Decree 341. The law banned on-site concrete production in over 200 cities. Seems like it would be bad news for concrete producers, right? Not for CADC. They had the capacity and knowhow to adapt and profit big.

Their eco-friendly RMC cemented their leadership position in the market. The company’s portable RMC plants reduce worksite noise, dust, and transportation impacts.

This became especially important when CADC was awarded part of the lucrative High Speed Rail contract. They currently have 24 portable RMC plants in 10 provinces working on the project.

 

CADC’S FINANCIALS

The China growth story is clearly reflected in this company’s financials.

Revenue at the end of CADC’s fiscal year in June 2008 was $27.5 million. Revenue this year is up to a staggering $137.9 million… up 400% from 2008. And this growth was achieved in a rough economy… imagine what happens when times improve.

Net income was up 42% to $17.1 million.

This company doesn’t keep a lot of cash or debt on its books. At the end of the year the company had $1.6 million cash on hand. But total assets were approximately $144.8 million.

The return on equity is high at over 26%. Clearly management’s using shareholder profits effectively.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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