/C O R R E C T I O N from Source -- Bouyan Construction Group, Inc./

In C5716 transmitted on Thursday, February 14, 2013, there was an error in the headline. The word "Record" should have been removed from the headline. Corrected copy follows:

Boyuan Reports Second Quarter FY2013 Financial Results

TORONTO, Feb. 14, 2013 /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- and six-month periods ended December 31, 2012.  All figures are in U.S. dollars unless otherwise stated.

Selected Fiscal Year Financial Highlights

In thousands except share and % data	Q2 FY2013	Q2 FY2012	Change
Revenue	$54,241	$54,295	-0.1%
Gross profit	$8,022	$8,736	-8.21%
Gross profit margins	14.8%	16.1%
EBITDA^1	$6,583	$7,580	-13.2%
Net income	$1,594	$3,050	-47.7%
Earnings per share - diluted	$0.06	$0.11	-45.5%
	Dec. 31, 2012	June 30, 2012
Total Assets	$183,024	$172,685	+6.0%
Cash, cash equivalents and restricted cash	$15,007	$11,081	+35.4%

"The second quarter of fiscal 2013 reflect the challenges we are facing in respect to 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.  "These results also reflect our strategic decision to be very selective in choosing which new construction projects we accept in order to minimize risk and to preserve capital, which we have been consistently executing over the past few quarters.  As a result we have continued to successfully grow our cash reserves."

Q2 FY2013 Operational and Financial Highlights

• Revenue of $54.2 million, in line with Q2 FY2012 of $54.3 million
• Q2 EBITDA of $6.6 million, down 13% from $7.6 million in Q2 FY2012
• Q2 net earnings of $1.6 million, down from $3.1 million in Q2 FY2012
• $46.2 million worth of projects initiated to date for the current fiscal year
• Total cash balance of $15.0 million at quarter end

Highlights Subsequent to Querter End

• Initiated a luxury hotel construction project located in Hainan Lingshui County, valued at $10.9 million

Review of Financial Results
Revenue for the three-month period ended December 31, 2012 was $54.2 million, essentially the same as the corresponding period in FY2012.  Revenue for the first six months of FY2013 was $106.3 million, down 1.2% from $107.6 million for the same period of 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 continued to be more selective in taking up new construction projects under the current uncertain economic environment.

Cost of construction for Q2 FY2013 was $46.2 million, up 1.3% from $45.6 million for Q2 FY2012.  Cost of construction for the first six months of FY2013 was $90.5 million, down 0.4% from $90.9 million for the corresponding period of 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 $32.4 million and labour costs were $11.4 million in this quarter. In comparison, direct material costs and labour costs were $33.6 million and $9.9 million in the same quarter last year.

Gross profit for Q2 FY2013 was $8.0 million, which represented a margin of 14.8% on revenue. Gross profit for the corresponding period of last year was $8.7 million, which represented a margin of 16.1% on revenue. The year-over-year decline was attributable to a slight downward pressure on margins relating to the current real estate market situation in China. Developers have become more price sensitive and have longer development cycles, thus eroding some of Boyuan's normal margins. Historically, Boyuan's gross profit margins have been in the range of 15% to 17%.  On a six month basis, gross profit for FY2013 was $15.8 million, which represented a margin of 14.9% on revenue. In the same period of FY2012, gross profit and gross margins were $16.7 million and 15.5%, respectively.

G&A expenses were $1.4 million in Q2 FY2013 compared to $1.2 million in Q2 FY2012.  G&A expenses for the six months period ended December 31, 2012 were $2.6 million representing an increase of $0.5 million in the same period last year. The increase in G&A expenses in this quarter came from the increase in office administrative costs such as legal fees and audit fees.

Interest expense for Q2 FY2013 was $3.1 million, an increase of $1.6 million over last year.  On a year-to-date basis, interest expense for FY2013 was $5.0 million, up from $3.0 million for FY2012. The increase was due to an increase in borrowing as a result of longer payment cycles from our customers.  The average interest rates for bank loans were also higher this year due to the generally tight liquidity situation in the PRC.

After-tax net income for Q2 FY2013 was $1.6 million, or $0.06 per fully diluted share, compared to net income of $3.1million, or $0.11 per fully diluted share, for Q2 FY2012.   The decrease in net income was a result of smaller gross profit margin for the period and the increases in G&A expenses and interest expenses.  On a six-month basis, net income for FY2013 was $4.3 million or $0.17 per share fully diluted. This compares to a net income of $5.9 million, or $0.23 per share fully diluted, for the same period of FY2012.

The Company had working capital of $59.0 million, including cash and cash equivalents of $8.5 million for the period ended December 31, 2012. This compares to $54.1 million and $3.1 million, respectively, at June 30, 2012.  The increase in working capital is due to the contribution of net earnings and improved working capital management.

Boyuan's consolidated statements for the three-and six- month periods ended December 31, 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.

Subsequent Event
At December 31, 2012, the Company was in violation of its convertible debenture agreements as the Company failed to file its annual consolidated financial statements before the end of September, 2012.  Under the terms of the convertible debenture agreements, such noncompliance constitutes an event of default which gives the holders of the convertible debentures the right to declare all outstanding principal and accrued interest under the agreements immediately due and payable after the passage of a 30 day waiting period and compliance with the default notice provisions. On January 29, 2013, the Company obtained a waiver of the event of default and a waiver of the acceleration from the debenture holders.

Conference Call Notice
The Company will hold a conference call to discuss its fiscal Q2 FY2013 financial results on February 15, 2012 at 10:00 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 February 22, 2013 at midnight. To access the archived conference call, please dial 1-855-859-2056 or 416-849-0833 and enter the reservation number 96972348#.

A live audio webcast of the conference call will be available from the investor relations section of the Company's website, www.boyuangroup.com, or from www.newswire.ca.  Please connect at least 15 minutes prior to the conference call to ensure adequate time for any software download that may be required to join the webcast.  The webcast will be archived at the above web site for 30 days.

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 52 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 please 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, 2011 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.

^{_____________________________
1}  EBITDA is defined as earnings before interest, income taxes, depreciation and amortization. EBITDA is not a defined performance measure under IFRS.

 

 

SOURCE: Boyuan Construction Group, Inc.

Contacts
Boyuan Construction Group, Inc.
Mr. Paul Law, CFO
+(852) 9329 5088
[email protected]     

TMX Equicom
Philip Dale
[phone] ext. 253
[email protected]