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 unaudited results for the six months ended 30 June 2012 (the “review period”).  Building on the growth momentum since the second half of 2011, the Group’s revenue and profit attributable to shareholders for the review period surged 60.9% and 152.0% year-on-year, to approx. RMB6.88 billion and RMB1.04 billion, respectively.

 

The installation of 18 large extrusion presses since 2011 has enhanced the Group’s product mix, resulting in an increase in the amount of high-end large-section industrial aluminium extrusion products sold. The rise in sales of high-margin deep-processed products during the review period also contributed to improvements in gross margin, which expanded by 2.8 percentage points to 23.4% in the first half of 2012. 

 

Mr. Lu Changqing, Executive Director and Vice President of China Zhongwang, said, “The Group reported prudent progress during the review period. After a year of strategic adjustments, we delivered encouraging results on various fronts such as product R&D, capacity expansion and market development, thereby restoring operational efficiency and delivering continued growth. The Group continued to focus on the R&D of high value-added aluminium processing products, and major efforts have been devoted to tapping potentials of China’s aluminium processing market, our primary market, while the export market took a supplementary role. We extended our business scope to cover deep-processed products, an export business growth driver, as well as the high-precision aluminium flat rolled business which is expected to offer significant operational synergies with the extrusion business. These three core business lines will contribute to delivering sustainable growth, forming a strong cornerstone for our future development in the industry. .”

 

During the review period, the Group continued to expand and consolidate its customer base comprising mainly large-scale SOEs and enterprises under the direct supervision of the Central Government. Driven by strong sales growth in China, the Group’s revenue jumped 51.2% year-on-year to RMB 6.33 billion, while sales volume of aluminium extrusion products rose 51.8% to 286,110 tonnes, achieving more than 50% of the Group’s annual sales target of 500,000 tonnes. 

 

The industrial aluminium extrusion business has been the Group’s principal operation that provides stable cash flow. The Group has, beginning from 2011 until the end of this year, been installing 18 large extrusion presses of 75MN or above. Upon completion, it will have more than 20 sets of such large extrusion presses, including four 125MN presses which are currently the world’s largest presses in operation. In addition, to capitalise on increasing applications of high-end large-section aluminium extrusion products, the Group has, during the review period, placed order for two mega-sized 225MN presses, with core components from Germany. Deliveries of these presses, the largest and most advanced of their kind in the world, will start from 2014. The Group’s continued commitment to strengthen its competitive edge in terms of equipment and technological standards will further cement its leadership in the industry.

 

Deep-processed aluminium extrusion products serve as a bridge to re-connect the Group to overseas markets. Such high-value added products enable the Group to achieve product mix upgrade and break through the “anti-dumping and countervailing duty” restrictions imposed by certain overseas markets on China-produced aluminium extrusion products. This explains why the Group’s export sales regained growth impetus during the review period, with sales revenue increasing by 524.3% to RMB 551 million.

 

The Group’s newly established deep-processing centre has imported a number of automated welding lines and ancillary equipment from Europe. Installation and testing works are currently underway. These highly automated equipment are capable of producing large-sized deep-processed products, such as aluminium alloy vehicle bodies and components, with high efficiency and precision.

 

“Deep-processed aluminium products offer higher added value and therefore command a premium to that of general industrial aluminium extrusion products. It allows the Group to reopen the door to its export market. The Group’s distinct competitive edge will be further enhanced when the deep-processing centre becomes fully operational by the second half of 2012,” Mr. Lu added.

 

The aluminium flat rolled project made significant progress during the review period.  An industrial land site in Wuqing District, Tianjin, was acquired for the construction of a new production base for aluminium flat rolled products. Preliminary infrastructure works are now in progress as planned. The Group has made purchase for production equipment from Germany and the United States, for the manufacture of high-end medium thickness aluminium plates, sheets and foils. Deliveries of major equipment are to be made in batches starting from the end of 2013. In the next two years, the Group will dedicate efforts to oversee the construction of Phase I of the project and target at the completion and commissioning of production facilities with an annual capacity of 1.8 million tonnes in the second half of 2014 and 3 million tonnes by 2018.

 

In connection with technology and human resources development, the Group has commenced the process of overseas recruitment of high-calibre technical personnel, in a bid to gear up technological resources and the research and development process for aluminium flat rolled products. Given its strengths and leading edge in technology, staff support, customer base and financial resources, the Group is fully confident in the future development of this business segment.

 

Notwithstanding adjustment pressure in the domestic economy, as reflected by the nation’s major economic indicators, China is expected to sustain growth momentum as an emerging economy The Chinese government supports and advocates the development of new sectors such as high-end equipment manufacturing, new energy, new materials, new energy automotive, coupled with the light-weight development trend of the transportation sector, consumption of industrial aluminium extrusion products is expected to sustain stable growth.  China’s demand for industrial aluminium extrusion products will reach 4 million tonnes for the full year of 2012, representing a solid year-on-year growth of 12%, according to the Group’s projection.

 

The Chinese Government has indicated its enhanced guidance and support for high-end manufacturing industries in two important policy documents, “12th Five-Year (2011–2015) Development Plan for the Non-ferrous Metal Industry” and “Industrial Transformation and Upgrade Plan (2011–2015)”, promulgated in December 2011 and January 2012, respectively. In “12th Five-Year (2011–2015) Development Plan for the Non-ferrous Metal Industry”, in particular, a sub-plan for the aluminium industry — “Special Development Plan for the Aluminium Industry during the 12th Five-Year Period (2011–2015)” — has been formulated, calling for an average annual growth of above 12% in the industrial added value of the aluminium industry, the development of novel aluminium alloys and processing technologies and equipment, vigorous development of refined-/deep-processing, and the production of high-end aluminium products meeting the requirements of strategic new industries and other industries in terms of variety and quality during the 12th Five-Year Plan period. “Special Development Plan for the Aluminium Industry during the 12th Five-Year Period (2011–2015)” has expressly called for growth in the percentage share of sales revenue generated from high-end aluminium products from 8% in 2010 to 20% in 2015. This would be favourable to China Zhongwang who has positioned itself over the years as a supplier of high-end products embodying advanced technologies.

 

In addition, the Chinese Government has introduced a series of plans and guidance including “The State Guiding Catalog of Industrial Structure Adjustment (2011)”, “12th Five-Year Development Plan for New Materials Industries”, “12th Five-Year Development Plan for High-end Equipment Manufacturing Industry” and “Development Plan for Energy-saving and New Energy Automotive Industry”, all of which have emphasized the importance of aluminium alloy as a high-performance metal material and encouraged extensive applications in such sectors as aviation and aerospace, automobile and high-speed  trains.

 

“Chinese government policies have shown explicit attention and support to the development of high-end aluminium processed products. China"s aluminum processing industry is entering a golden development era. China Zhongwang’s strategy encompassing the high-end industrial aluminium extrusion, deep-processing and high precision aluminium flat-rolled businesses is in perfect tandem with the directions set out in the PRC Government’s policies and in line with the overall trend of China’s industrial upgrade development plans. Driven by favourable market condition and national policies, the Group will continue to strengthen the solid foundation of its industrial aluminum extrusion business while vigorously developing deep-processing business to enhance its profitability. Meanwhile, the aluminium flat rolled project is developing in full gear, paving the way for the sustainable profit growth and creating viable growth and return for our shareholders," Mr. Lu concluded.