Cavico Corp. Announces Third Quarter 2008 Results
Tuesday November 11, 1:00 pm ET
-- Revenues climb 90.8% year-over-year to reach $14.7 million
LOS ANGELES & HANOI, Vietnam--(BUSINESS WIRE)--Cavico Corp. (“Cavico” or “the Company”) (OTC BB: CVIC - News), a leading infrastructure development company in Vietnam, today announced financial results for the third quarter ended September 30, 2008.
Third Quarter 2008 Highlights
Revenue for the third quarter increased 90.8% year-over-year to $14.7 million
Gross profit increased 61.1% year-over-year to $1.6 million and gross margin was 10.6%
Net income was $148,984
Received $2.8 million cost adjustment on the Bao Loc hydropower project
Revenues for the third quarter of 2008 increased to $14.7 million, up 90.8% from $7.7 million in the third quarter of 2007. Cavico’s strong revenue growth in the third quarter resulted from an increase in construction and mining projects. During the third quarter of 2008, revenue from mining construction projects increased by $32,690, or 4% to $851,672, from $818,982 in the third quarter of 2007. The growth in mining was due to increased mining activity at the Nui beo mine. Revenue from civil construction projects increased by $6.8 million, or 106%, to $13.2 million in the third quarter of 2008 from $6.4 million during the same period last year. The robust growth was due to the additional revenues from new hydropower construction projects managed by the Company.
Our outstanding revenue growth of more than 90% in the third quarter was primarily driven by our ability to win new projects in our construction and mining business. We believe our reputation as one of Vietnam’s leading infrastructure management company combined with our advanced technological expertise enables us to exceed client’s expectations and provides us with a significant competitive advantage. Our business has also benefited from the cost adjustments received on various projects and we are happy to report that both the Vietnamese government and our clients have provided complete cooperation. We continue to remain very positive of our growth prospects in Vietnam,” said Mr. Hai Thanh Tran, Vice President of Cavico Corp.
Third Quarter Results
Net sales in the third quarter of 2008 were $14.7 million, up 90.8% from the third quarter of 2007. Sales from civil construction increased 106% year over year to $13.2 million, and accounted for 89.8% of net sales. The significant growth in revenues from civil construction was a result of new hydropower projects added during the quarter. Sales from mining increased by $32,689 or 4% to reach $0.9 million, accounting for 5.8% of net sales in the third quarter of 2008, and other operations and production accounted for the remaining 4.4% of net sales.
Gross profit was $1.6 million or 10.6% of sales compared to $1.0 million or 12.5% of sales for the three months ended September 30, 2007. The decline in gross margin during the quarter was due to increased inflation in Vietnam during the third quarter of 2008.
Operating expenses totaled $1.7 million, up 61.7% from $1.1 million in the third quarter of 2007. The increase in operating expenses was primarily due to the rise in general and administrative expenses. The increase in G&A was a result of increase in payroll expenses due to salary increments, increase in administrative costs of corporate office and subsidiaries. The Company expects G&A expenses as a percentage of sales to decline.
The Company reported an operating loss of $0.2 million, compared with an operating loss of $0.1 million in the third quarter of 2007.
Other expense was $1.3 million in the third quarter of 2008, compared to other income of $5.2 million a year ago. This was mainly due to gain on sale of marketable securities of $5.6 million for the three-months ended September 30, 2007 compared to a loss of $0.4 million reported during the same period in 2008. The interest income earned during the quarter was also lower at $0.2 million compared to $0.5 million for the same period in 2007.
The Company accrued $2.9 million of taxes related to the year ended December 31, 2007. During the third quarter of 2008, the Company determined that its actual tax obligation was lower than this original estimate and the difference of $1.9 was recorded as a reduction of tax expense during the third quarter of 2008.
Net income was $148,984 compared to $3.7 million a year ago. Earnings per share were $0.00 and $0.03 for the three-month periods ended September 30, 2008 and 2007, respectively.
Nine Months Results
For the nine months of 2008, total revenue was $42.5 million, up 111.0% from the nine months of 2007. Revenue from mining construction was $3.0 million, a decline of $51,946 or 2% from the same period a year ago. Revenue from civil construction was $37.6 million, up by 134.0% from $16.1 million in the first nine months of 2007. Revenue from other operations, including leasing machinery and equipment, selling materials, was $1.5 million, up 49% from $0.5 million for the nine-month ended September 30, 2007. Revenue from production was $0.4 million for the nine-month ended September 30, 2008 from a new subsidiary - Cavico Industry and Technical Service with steel fabrication production.
Total gross profit for the nine months of 2008 was $7.2 million, up 160.7% from gross profit of $2.8 million in the comparable period a year ago. Total gross margin was 17.0% and 13.7% for the nine months of 2008 and 2007, respectively. Income from operations was $2.3 million compared to loss from operations of $0.6 million in the nine months of 2007. Net income for the nine months of 2008 was $0.7 million, compared to $4.1 million in the nine months of 2007. Earnings per share were $0.01 and $0.03 for the nine-month periods ended September 30, 2008 and 2007, respectively.
Financial Condition
As of September 30, 2008, the Company has $1.8 million in cash, accounts receivable of $21.6 million and construction work in progress of $27.4 million. Total current liabilities as of September 30, 2008 were $74.1 million. During the nine months ended September 30, 2008, the Company generated $2.3 million in operating activities, while using $6.5 million in cash flow from operating activities for the same period in 2007.
Subsequent Events
In October 2008, Cavico announced that the Company’s majority owned subsidiary, Cavico Hydropower Construction has achieved a breakthrough on the headrace tunnel at the Dasiat hydropower project.
In October 2008, Cavico announced that Mr. Edward K. Chi, the Company’s former chief financial officer has resigned to devote his full time to his personal real estate development projects, and the Company’s CEO and Chairman, Mr. Ha Quang Bui, will take over as the interim CFO.
In October 2008, Cavico announced that the Company’s wholly owned subsidiary, Cavico Vietnam and majority-owned subsidiary Cavico Bridge and Tunnel Construction have made several changes to the management structure as a part of their leadership restructuring process, effective October 6, 2008.
In October 2008, Cavico announced that the Vietnam Ministry of Agriculture and Rural Development has awarded Cavico Vietnam, the Company’s wholly owned subsidiary, an additional contract to construct an inlet tunnel for diversion of construction and flood discharge, valued at $18.5 million, at the Ta Trach water reservoir project.
Business Outlook
Cavico has made constant progress in expanding its leading position in Vietnam’s infrastructure construction industry. The Company has been successful in acquiring new contracts. Vietnamese government continues to encourage energy companies and Cavico’s presence in the hydropower segment provides an attractive opportunity for growth.
“We are pleased to report a strong top line growth and we continue to take active efforts to control costs and improve efficiencies to ensure profitability. The growth of the Vietnamese economy is on the right track and our business is aligned to take advantage of the growing opportunities in the high growth construction market of Vietnam,” commented Mr. Hai Thanh Tran, Vice President of Cavico.
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