Boyuan Reports Third Quarter FY2014 Financial Results

- Record $62.6M in Quarterly Revenue -

TORONTO, May 14, 2014 /CNW/ - Boyuan Construction Group, Inc., (TSX: BOY, BOY.DB.A) a fast-growing construction company in China of commercial, residential and municipal infrastructure projects, today reported its financial results for the three- and nine-month periods ended March 31, 2014. All figures are in U.S. dollars unless otherwise stated.

Selected Fiscal Year Financial Highlights

In thousands except share and % data Q3 FY2014 Q3 FY2013 Change
Revenue $62,593 $41,387 51.2%
Gross profit $9,097 $6,032 50.8%
Gross profit margin 14.5% 14.6%  
EBITDA1 $7,641 $4,085 87%
Net income $3,447 $1,353 142.9%
Earnings per share - diluted $0.13 $0.06 116.6%
  March 31, 2014 June 30, 2013  
Total Assets $210,721 $194,347 8.4%
Cash, cash equivalents and restricted cash $9,574 $13,321 (28.1%)

"Our strategy of focusing on construction opportunities in Hainan province and in tier-two cities in the Yangtze River Delta generated record revenue in the third quarter of fiscal 2014, and our strong results further validate our strategic decision to remain selective in choosing which new construction projects we accept in order to minimize risk, preserve capital and ensure profitability," said Mr. Cailiang Shou, Chairman of Boyuan Construction Group. "The restrictive financial measures imposed by the central government continue to influence the residential real estate market in China, resulting in a slower pace of growth for the Company. But the market fundamentals that generated two consecutive years of record revenue growth in 2012 and 2013—the continued growth of China's middle class and the ongoing development of tier-two cities as a result of urbanization—remain unchanged. As the numerous projects undertaken subsequent to quarter end demonstrate, we remain committed to actively pursuing high value opportunities in spite of market conditions."

Q3 FY2014 Operational and Financial Highlights

  • Revenue of $62.6million, up 51.2% from revenue of $41.4 million in Q3 FY2013
  • Q3 EBITDA of $7.6 million, up 87% from $4.1 million in Q3 FY2013
  • Q3 Net income of $3.4 million, or $0.13 per diluted share, up from $1.4 million, or $0.06 per diluted share, in Q3 FY2013

Highlights Subsequent to Quarter End

  • Initiated construction on a multi-family residential complex valued at $8.5 million in Ledong County in the southwest of Hainan Island
  • Initiated construction on a $8.2 million school project in Sanya City on the southern shore of Hainan Island
  • Initiated construction on a multi-family residential complex valued at $21.6 million in Haining City, about 125 kilometres west of Shanghai

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 Results
Boyuan generated record revenue of $62.6 million in the three-month period ended March 31, 2014, an increase of 51.2% from $41.4 million in the same period in FY2013. Boyuan recognizes revenue on the percentage-of-completion method. The significant increase in revenue in the current period was mainly driven by the new projects the Company has taken up in the past six months, particularly in the Yangtze River Delta. In addition, the Company has been becoming gradually more proactive in securing construction projects since paying off its 11.75% secured debentures in May 2013. Revenue for the first nine months of FY2014 was $173.6 million, an increase of 17.5% from $147.7 million for the corresponding period last year.

Cost of construction for Q3 FY2014 was $53.5 million, an increase of 51.3% from $35.4 million in Q3 FY2013. The increase was primarily due to higher expenses associated with increased project volume during the period. For the first nine months of FY2014, cost of construction was $148.3 million, an increase of 17.8% from $125.9 million for the first nine months of FY2013. Cost of construction includes all direct material, labour, 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 for Q3 FY2014 were $40.2 million and labour costs were $12.9 million, compared to direct material costs and labour costs of $26.5 million and $8.8 million respectively in the same period in the prior year.

Gross profit for Q3 FY2014 was $9.1 million, which represented a margin of 14.5% on revenue, compared to gross profit for Q3 FY2013 of $6.0 million, which represented a margin of 14.6% on revenue. The Company has experienced a slight downward pressure on margins under the current real estate market conditions in China. Developers are becoming more price sensitive and have longer development cycles, thus eroding some of the Company's normal margins. Historically, Boyuan's gross profit margins have been in the range of 15% to 17%. On a nine-month basis, gross profit for FY2014 was $25.4 million, which represented a margin of 14.6% on revenue. For the same nine-month period in 2013, gross profit and gross margin were $21.9 million and 14.8% respectively.

G&A expenses were $1.2 million in Q3 FY2014 compared to $1.1 million in Q3 FY2013. G&A expenses for the current nine-month period were $3.8 million compared to $3.6 million for the same period in the prior year. G&A expenses have remained stable year over year in spite of the increase in revenue in the first nine months of FY2014 and especially in the third quarter.

Interest expense for Q3 FY2014 was $1.9 million, virtually unchanged from the same period last year. On a year-to-date basis, interest expense for FY2014 was $5.5 million, down from $6.9 million for FY2013. The decrease in interest expense was mainly due to a decrease in interest paid on receivables discounting. The Company discounted fewer receivables in the period as a result of its improved cash flow position.

After-tax net income for Q3 FY2014 was 3.4 million, or $0.13 per fully diluted share, compared to net income of $1.4 million, or $0.06 per fully diluted share, in the same period in FY2013. For the nine-month period, net income for FY2014 was $9.4 million, or $0.34 per fully diluted share. This compares to net income of $5.6 million, or $0.22 per fully diluted share, for the same period in FY2013.

The Company had working capital of $95 million, including cash, cash equivalents, and restricted cash totaling $9.6 million as at March 31, 2014. This compares to $79.8 million and $13.3 million respectively at June 30, 2013. The increase in working capital is due to the contribution of net earnings and improved working capital management.

"The strong underlying market forces of urbanization and the growth of the middle class that are driving growth in China suggest that demand for Boyuan's construction services will remain strong for the long term, and we remain optimistic about the prospects for the Company going forward" added Mr. Shou. "To capitalize on these market forces, we will continue to expand our reach in tier-two cities and focus on specialty construction projects, which we believe will deliver higher profit margins. As part of this strategy, we are working to upgrade our qualification levels and engineering standards in order to put the Company in a better position to tap into this growing market potential."

Boyuan's consolidated statements for the three- and nine-month periods ended March 31, 2014 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

Conference Call Notice
The Company will hold a conference call to discuss its third-quarter, fiscal 2014 financial results on Thursday, May 15, 2014 at 9:00 a.m. ET. Mr. Paul Law, Boyuan's Chief Financial Officer, will host the call.

All interested parties can join the call by dialing 647-427-7450 or 1-888-231-8191. Please dial in 15 minutes prior to the call to secure a line.

The conference call will be archived for replay until Thursday, May 22, 2014 at midnight. To access the archived conference call, please dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 45284493#.

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, 2013, Boyuan completed 46 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

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, 2013 and in the Company's other public disclosure documents filed with certain Canadian securities regulatory authorities and available at  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:

Boyuan Construction Group, Inc.
Mr. Paul Law, CFO
+(852) 9329 5088     

TMX Equicom
Frank Condron
(416) 815-0700 ext. 233

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