China Fire & Security Group Inc. (CFSG) has signed a total solution contract with Wuhan Iron and Steel Corp. (WISCO) for the Fire Protection Retrofitting Project. WISCO is one of the top three iron and steel companies in China and receives strong government support in accordance with the Iron & Steel Revitalization Scheme.
The total value of the contract is estimated at approximately $92 million. According to the contract, CFSG will complete the overall retrofitting project of the fire protection facilities for WISCO’s 32 plants located in Qingshan, Hubei Province, by the end of 2011.
According to the company, China’s retrofitting market from iron and steel groups is estimated to exceed $2 billion in the next 3-5 years. This growth is expected to be driven by the new regulatory requirements and an emphasis from steel makers to allocate new capex spending towards safety and environmental improvements.
With strong support from the government, the company expects China’s iron and steel industry to accelerate retrofitting outdated fire safety systems in the near future. In addition, the company pointed that the Chinese government is encouraging overall technology upgrades in the iron and steel industry. According to the Ministry of Industry and Information Technology, the Chinese government invested approximately $8.5 billion in the technological transformation and upgrade of 47 projects of the iron and steel industry in 2009.
The company sees huge growth potential in this market in the coming years. With its leading brand reputation as a total solution provider and its comprehensive line of proprietary products, we believe CFSG is well-positioned to capitalize on this growth potential.
Guidance Update
In a separate announcement, CFSG updated its backlog and provided guidance for 2010. With the addition of the new contract with WISCO, the company’s current backlog has more than doubled to $154 million from $75 million at the end of Sept 30, 2009.
CFSG estimates 2009 revenue in the range of $81-$82 million and earnings in the range of 87-89 cents per share. This was lower compared to the company’s previous forecast of earnings of $1.00 to $1.05 per share on revenues of $88 million to $95 million for 2009.
For the full year 2010, CFSG expects revenue in the range of $135-$145 million, which represents year over year growth of approximately 66% to 78%. Earnings are forecasted in the range of $47-$49 million or $1.65-$1.70 per share.
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