China Zhongwang Reports Robust Earnings Growth in First Quarter 2012
China Zhongwang Reports Robust Earnings Growth in First Quarter 2012

Time:27 April 2012 Font size

China Zhongwang reports robust earnings growth in first quarter 2012

Net profit rose 198% to RMB 491 million
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Sales of aluminium extrusion products rose 105% to 131,000 tonnes
Gross profit margin expanded to 25.8%
Financial Highlights (Unaudited)
China Zhongwang Holdings Limited (“China Zhongwang” or “the Company”, together with its subsidiaries “the Group”, stock code: 01333), today announced the unaudited financial results and operational statistics for the three months ended 31 March 2012 (the “review period”). The Group recorded robust growth, mainly led by the substantial rise in sales of industrial aluminium extrusion products and the increase in gross profit margin during the review period. Revenue and profit attributable to shareholders rose 118 % and 198% on a year-on-year basis, reaching approximately RMB3.24 billion and RMB 491.4 million respectively.  
Sales revenue from domestic sales in the China market rose 107% year-on-year to RMB2.95 billion. The growth generated from export markets was even more impressive, with sales revenue reaching RMB293.1 million, representing a surge of 333%. During the review period, the sales volume of aluminium extrusion products increased by 105% year-on-year to approximately 131,000 tonnes. With several large extrusion presses put into operation in the second half of 2011, sales of high-end products as well as high-margin exports as a percentage of total sales went up.  As a result, the average product selling price increased by 6% year-on-year to RMB24,665, while the gross profit margin rose to 25.8% in the first quarter 2012, up from 24.1% in corresponding period in the previous year, notably higher than the annual average of 21.6% for the year 2011.  
Mr. Lu Changqing, Executive Director and Vice President of China Zhongwang, said, “The Group has restored growth momentum after 18 months of strategic business adjustment. Following the successive quarterly growth in 2011, we are able to sustain the uptrend in the first quarter of 2012 with significant increase in revenues from both domestic and export sales.  The ongoing market development efforts yielded results. We saw continued growth in the industrial aluminium extrusion business, contributing stable cash flow and profits to the Group. The deep-processing business, which commands higher added value and margins, enables us to tap opportunities in export markets and therefore enhances our profitability. Also, the aluminium flat rolled business currently being developed in full swing will benefit from the shared resources of upstream and downstream markets, technological know-how, and client resources, achieving synergies and fostering a medium-to-long term growth engine. Going forward, we will make every effort to expand our customer base and establish a more comprehensive sales platform. We will also optimize our products mix and consistently extend our business scope to high value-added businesses. We have confidence in achieving the target sales volume of over 500,000 tonnes this year.”
Strengthen industrial aluminium extrusion business through capacity expansion 
Following the installation and operation of 18 large extrusion presses of 75MN or above from 2011 to the end of this year, the Group will achieve economies of scale in addition to enhancing capacity for high-end, large section industrial aluminium extrusion products. Upon completing the installation, the Group will have four of the world’s largest 125MN extrusion presses in operation by the end of this year, raising the annual capacity of industrial aluminium extrusion products to over 1 million tonnes.
Deep-processing business commenced production, driving export sales development
Revenue from export markets rose 333% year-on-year to RMB293.1 million in the first quarter of 2012. The growth came mainly from the increase in sales of deep-processed products as such products do not fall under the scope of U.S. anti-dumping and countervailing duties.  Export sales accounted for 9% of the total revenue in the first quarter in 2012, compared to 4.5% in the first quarter in 2011. The Group is developing the deep-processing center in full swing with the goal of commencing full operation in the second half of 2012.
Implement high-end product business to raise profitability 
The Group announced the development of the high-end aluminium flat rolled business at the end of 2011, paving the way to embrace future growth with optimized product mix and an integrated industry chain. During the review period, the Group acquired a land site in Tianjin for the construction of an aluminium flat rolled product manufacturing base. Infrastructure development works are now in progress. Meanwhile, it has started recruiting overseas industry veterans with high-end technological expertise to strengthen the company’s technology and talent pool. 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. 
Three core businesses to achieve synergistic development 
Seize the opportunities from the policy support of “12th Five-Year Plan”   
The Chinese Government has issued several policy documents which are favorable to the development of aluminum processing industry. These policy documents, which include “The 12th Five Year (2011-2015) Development Plan for the Non-ferrous Metal Industry”, “The 12th Five Year Development Plan for the New Materials Industries”, and “Industrial Transformation and Upgrade Plan (2011-2015)” have emphasized the importance of aluminium alloy and advocated the development of key projects in aluminium alloy 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. In light of the high degree of importance attached to the development of high-end aluminium products by the Chinese government, the Group is poised to benefit from the huge potentials of these markets. 
“The long-term development strategy of the Group is in line with the government policy. We are ready to embrace the golden years of development for the aluminium processing industry ahead of us. Along with the increasing application fields for industrial aluminium extrusion products, we expect the market demand in China will grow by more than 12% to 4 million tonnes this year. China Zhongwang has built a stable customer base comprising large state-owned enterprises, safeguarding the revenue and profit from both the industrial aluminium extrusion and deep-processing businesses, and laying a solid foundation for the high-end aluminium flat rolled business. Going forward, the implementation of flat rolled and deep-processing businesses will further enhance our product mix, consistently improving gross profit margins under the synergistic effects. Meanwhile, the Group will keep striving for increased productivity, strengthening the leading position in the industry and creating more values for shareholders,” Mr. Lu concluded.