Light-Weight Development Trend Fuels Steady Business Progress
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 nine months ended 30 September 2012 (the “review period”). The Group achieved satisfactory growth in the review period, with revenue and profit attributable to shareholders surging by 57.4% and 108.4% year-on-year, to approximately RMB10.74 billion and RMB1.39 billion respectively. The rise in profitability is attributed to the substantial rise in sales of industrial aluminium extrusion products and deep-processing products.
Mr. Lu Changqing, Executive Director and Vice President of China Zhongwang, said, “Despite the challenges facing the aluminium processing industry brought about by the volatile macroeconomic conditions in 2012, China Zhongwang remains effective in expanding its presence in the China market through market strategy adjustments, strengthening research and development, and product upgrade. During the review period, sales volume of industrial aluminium extrusion products increased by 57.7% year-on-year to 474,701 tonnes. The deep-processing business progressed as planned, boosting the overall gross profit margin to 21.4%, representing an increase of 1.5 percentage points from the same period of last year.”
Upgrade high-end industrial aluminium extrusion products to consolidate leadership position in China market
The Group is committed to promoting light-weight development by providing high precision, large-section, high value-added industrial aluminium extrusion products to transportation, machinery and equipment and electric power engineering sectors. During the review period, the Group continued to focus its resources on tapping opportunities in the China market, while assigning a supplementary role to the export market. The Group actively expanded its market share in the high-end segment by providing high precision products to large enterprises in China. In the first nine months, sales revenue from the China market rose 49.5% year-on-year to RMB9.92 billion, contributing stable cash flow to the Group.
Earlier this year the Group ordered two 225MN presses -- currently the largest and most advanced presses in the world. They will be delivered starting from 2014. With the backing of advanced equipment and technologies, the Group will continue to stay at the forefront of the industry in seizing market opportunities.
Deep-processing and high-end aluminium flat rolled businesses develop as planned, offering growth momentum
The Group expanded its offerings to deep-processed industrial aluminium extrusion products which have higher technology contents. These products are not subject to the anti-dumping and countervailing duties by the United States, thus enabling the Group to regain access to the US market for its export products. As such, export sales in the review period amounted to approximately RMB 820 million, accounting for 7.6% of the total revenue. Contribution from the deep-processing business is expected to increase further when the Group’s new deep-processing centre becomes fully operational by the end of 2012.
The new aluminum flat rolled product project is making good progress. The production base is located in Wuqing District, Tianjin City. The Group has made purchases for production equipment from Germany and the United States. Deliveries will be made in batches starting from the end of 2013. The Group has also started recruiting high- calibre technical personnel from overseas, to accelerate the R&D progress and strengthen the talent pool. The Group plans to complete the construction and commissioning of production facilities with an annual capacity of 1.8 million tonnes by the end of 2014 and to achieve the full capacity of 3 million tonnes per annum by 2018.
The deep-processing and high precision aluminum flat rolled product businesses, being the future growth engines, will help diversify the Group’s product offerings and expand the Group's gross profit margin in the long term.
Environment-friendly new materials lead to new era of light-weight development
As an eco-friendly recyclable new material, aluminum alloy offers light-weight, high strength, high formability features. It is gradually replacing certain traditional materials and has been widely applied in sectors such as transportation, electricity and machinery. With the acceleration of light-weight development of the industries in China, the application of industrial aluminium extrusion products in the automotive, aviation and aerospace, and rail transportation sectors has become a trend. For example, a 100 kg weight reduction of a vehicle will save 300-800 liters of fuel consumption in its life span and will reduce its greenhouse gas emission by 9 grams for every 1,000 meters it travels. The structural upgrade of electrical equipment has facilitated the gradual move towards the application of aluminium products to wind turbine blades and other products.
In terms of aluminium flat rolled products, a report by the Boston Consulting Group predicts that the global consumption of aluminum flat rolled products will increase to approximately 32 million tonnes in 2020 from approximately 19 million tonnes in 2011. The China market growth is projected to outpace the global average, rising from about 7.6 million tonnes in 2011 to about 16 million tonnes in 2020, accounting for half of the global consumption.
"The macroeconomic outlook remains uncertain in the fourth quarter. China, despite being a fast growing emerging economy, has to face economic adjustment pressure, posing challenges to the aluminum processing industry. As one of the industry leaders, Zhongwang’s top priority is to enhance our own competitiveness. We will continue to develop and diversify high-end industrial aluminum product offerings, strengthen the deep-processing business, and make an all-out effort to advance the aluminum flat rolled product project, so as to build stable and diversified revenue streams. The Group strives to become the world's top comprehensive high-quality processed aluminium product developer and manufacturer and is committed to maximizing the returns for our shareholders," Lu Changqing said.