China Zhongwang Posts RMB1.11 Billion Net Profit For 2011
China Zhongwang Posts RMB1.11 Billion Net Profit For 2011

Time:23 March 2012 Font size

 China Zhongwang Posts RMB1.11 Billion Net Profit For 2011

China Sales Volume Rose 68.3%   Net Profit Surged 73.1% QoQ in 2011 Q4 
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Aluminium Flat Rolled Project Develops in Full Gear to Boost Profitability
(Hong Kong, 22nd March 2012) – China Zhongwang Holdings Limited (“China Zhongwang” or “the Company”, together with its subsidiaries “the Group”, stock code: 01333), the second largest industrial aluminium extrusion product developer and manufacturer in the world and the biggest one in Asia and China, announced the audited results for the year ended 31 December 2011 (the “review period”). The Group’s revenue and profit attributable to shareholders amounted to approximately RMB10.31 billion and RMB1.11 billion respectively in 2011. 
Strategic business adjustment yielded results 
The Group achieved successive quarter-on-quarter profit growth in 2011 as a result of its ongoing market development efforts, capacity expansion and technological advances. The notable increase of sales volume in the China market offset the adverse impacts of the punitive 400% anti-dumping and countervailing duties imposed by the US government on certain Chinese exported aluminium extrusion products. The Group’s sales volume for the year under review rose 27.4% year-on-year to 442,506 tonnes, beating its full year sales target. The China market has become the Group’s major source of revenue, generating sales of RMB9.84 billion, representing a 68.3% growth as compared to 2010 and accounting for 95.5% of total revenue, up from 55.6% in 2010. 
The Group saw continual improvements in revenues and net profits since the first quarter of 2011, with particularly impressive growth in the fourth quarter which was marked by a 73.1% quarter-on-quarter surge in net profit to RMB440 million, indicating that its business is gaining impetus. 
Mr. Liu Zhongtian, Chairman and President of China Zhongwang, said, “The Group was able to foster economies of scale and to establish market leadership in the aluminium processing sector as a first mover who had consistently focused on the development of aluminium processing industry with special emphasis on technologies and products. Over the years, the Group has built a very solid foundation in terms of aluminium alloy smelting and casting technologies, die development, product research and development as well as up/downstream network resources, providing an unshakeable cornerstone as the Group sought to tap further opportunities in the aluminium processing industry. On top of its existing industrial aluminium extrusion business, the Group extended its scope of operations to the deep-processing business and implemented its development plans for the aluminium flat rolled business during 2011, forming a preliminary business structure with three resource-sharing, complementary and synergistic core businesses.”
Industrial aluminium extrusion products: the source of stable cash flow 
The industrial aluminium extrusion business is the principle core business of the Group that provides stable cash flow and profits. Growing hand-in-hand with the light-weight development trend globally is the increasing demand for large-section high-end industrial aluminium extrusion products. Currently, China’s industrial aluminium extrusion market is facing intense competition in the low-end segment while suffering from insufficient high-end production capacity. In order to capture opportunities in the high-end segment, the Group has swiftly increased the number of large-scale extrusion presses.  
The Group is adding 18 large extrusion presses of 75MN or above in 2011 and 2012, which include nine 75MN, six 90MN, and three 125MN extrusion presses, bringing the Group’s number of 125MN extrusion presses - the world’s largest - to four. At this rate of expansion, its annual production capacity is expected to exceed 1 million tonnes by end of 2012. 
Aluminium alloy smelting and casting technology underpins one of the core competitive advantages of the Group. Its tilt smelting and casting facility, one of the largest of its kind in China, is capable of smelting aluminium alloy billets with specified alloy compositions as requested by customers. The Group further increased the capacity of its aluminium alloy smelting and casting facility by adding the sixth aluminium smelting and casting line which commenced production in 2011.
Mr. Lu Changqing, Vice President and the Executive Director of China Zhongwang, added, “The Group holds an optimistic view on the development prospects of China’s aluminium processing market, and expects to see a 12% growth in demand to exceed 4 million tonnes this year. Our market strategy that focused mainly on the domestic market supplemented by the overseas market will continue to be implemented this year. While cementing our relationship with existing customers, we will also step up efforts to broaden our customer base.” 
Deep-processing business: a high value-added business that enhances profitability 
The Group continued to develop deep-processing techniques and expand its business along the high-end of the industry chain to sharpen its competitive edge. A dedicated team on deep-processing technologies was set up during the review period. A new deep-processing centre, built in the first half of 2011, commenced production. Through such procedures as high-precision welding and surface processing, the Group’s industrial aluminium extrusion products were processed into high value-added finished or semi-finished goods ready for use by customers.
The deep-processing business commands higher gross margins as it offers added value to customers. Such products do not fall under the scope of U.S. anti-dumping and countervailing duties and therefore will contribute to tapping export markets. It will further enhance Zhongwang’s competitiveness and become a key profit driver for the Group when the deep-processing centre is fully operational in the second half of 2012.
Aluminium flat-rolled project: a new project with high entry barrier and strong potential
The Group announced plans to develop the aluminium flat rolled business in 2011, following prudent and meticulous planning and comprehensive market research to ensure that it is equipped with the necessary technology, pool of talent and financial resources, among others. The key manufacturing facilities will be located in Wuqing District, Tianjin. 
The Group is investing HK$29.5 billion in four stages in 2011-2014 to purchase production equipment for aluminium flat rolled products imported from Germany and the United States. Products in the pipeline include medium-to-high-thickness aluminium plates, sheets and foils. Majority of the investment will be payable in 2013 and 2014. Meanwhile, the Group has embarked on a programme to recruit technical experts in the industry from overseas to accelerate the building of a technical talent team. Phase 1 of the project with an annual capacity of 1.8 million tonnes of aluminium flat rolled products is to commence production in the second half of 2014, while the total planned annual capacity of 3 million tonnes will be achieved by the end of 2018. 
Government actively supports development of high-end processed aluminium products
 “The 12th Five Year Plan (2011-2015) Development Plan for the Non-ferrous Metal Industry”, The 12th Five Year Development Plan for the New Materials Industry” and “The 12th Five Year Plan for the High-end Machinery Equipment Manufacturing Industry” set the backdrop for 10 years of golden development for the aluminium processing industry
China is now the world’s largest consumer and producer of aluminium extrusion products, accounting for more than 50% of the global aluminium extrusion production capacity and output. Light-weight development aimed at energy conservation, discharge reduction and low carbon emissions has become a global trend. Because of its light-weight substance, strong performance in corrosion resistance, electric conduction and heat transfer and recyclability, aluminium alloy has become the unrivalled choice of materials for the purpose of reducing fuel consumption and lowering discharge. Market application of and demand for this products is rising.
“The Chinese Government has consecutively released a number of development reports. Amongst them are the “12th Five-Year Plan Development Plan for the Non-ferrous Metal Industry”, “12th Five-Year Plan for the New Materials Sector” , and “12th Five Year Plan for the High-end Machinery Equipment Manufacturing Industry” soon to be released. These plans emphasized the importance of aluminium alloy as high-performing metal in the context of national policies and advocated the development of new aluminium alloy products such as plates for automobiles, large-scale extrusion products for high-speed trains, medium-to-high thickness plates for aviation and aerospace industries and aluminium alloy plate materials for cryogenic equipment. China Zhongwang’s strategy of focusing on the high-end industrial aluminium extrusion and the flat rolled businesses currently in execution is in sync with the guiding principles set by the Chinese Government. The Group has obtained a number of international certifications and quality accreditations in 2011. We are ready to embrace the golden years of development for the aluminium processing industry ahead of us,” Mr. Lu added.  
“Going forward, China Zhongwang will continue to focus on the domestic market and broaden its sales platform and thereby further strengthen the solid revenue stream from the industrial aluminium extrusion business, while broadening its product portfolio of high precision and deep-processed products to widen margins and increase profitability to form a medium term growth catalyst. The implementation of the flat rolled business will drive the Group’s long-term development and consolidate its leading position in the industry. Fuelled by this trio synergistic business engine, we have every confidence to deliver sustainable growth and fruitful returns to our shareholders,” Mr. Lu concluded. 
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China Zhongwang is the second largest industrial aluminium extrusion product developer and manufacturer in the world and the biggest one in and Asia and China.  It has been primarily focusing on the light-weight development of transportation, machinery and equipment and electric power engineering sectors through the provision of quality industrial aluminium extrusion products. It currently operates 79 extrusion production lines, including a 125MN oil-driven dual action extrusion press which is currently the largest of its kind in China and one of the most advanced in the world. These facilities enable the Company to produce large-section and high-precision industrial aluminium extrusion products tailored to its customers’ needs. These products are widely used in the transportation sector such as cargo and passenger compartments, metropolitan railway, aviation, vessels, automobiles, as well as machinery equipment and electric power engineering sectors etc. In addition, the Group plans to extend its business into the high value-added aluminium flat-rolled product segment. This new business venture will not only enable the Group to further capitalize on its leading edge in aluminium alloy smelting and casting and product research and development, but also achieve synergies with its existing business by taking full advantage of its customer and market resources in related downstream application sectors.