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 its audited results for the 12 months ended 31 December 2012 (the “review year”). The Group’s revenue and profit attributable to equity shareholders amounted to approximately RMB13.5 billion and RMB1.81 billion respectively, representing increases of 31.0% and 63.5% year-on-year. Gross profit margin of the Group was up by 2.6 percentage points to 24.2% during the review year. Basic earnings per shares rose 63.5% to RMB0.33. 

 

China Zhongwang’s Executive Director and Vice President Lu Changqing said, “After more than a year of business adjustments, the Group’s strategy of focusing on the PRC market paid off, delivering a marked improvement in its financial results. The Group continued to improve operational efficiency by strengthening product development, enhancing production technologies and optimizing equipment mix and capacity. Despite a lackluster global economic recovery pace, China remained one of the most vibrant economies of the world in 2012. Domestic demand for industrial aluminium extrusion products continued to rise steadily. Driven by China’s rising demand, the Group’s aluminium extrusion products sales volume in 2012 rose 25.6% to 555,670 tonnes. Sales from the China market rose 25.7% to RMB12.37 billion, accounting for 91.6% of the total revenue.”

 

The Group sought continued expansion of the deep processing business in response to demand for these products in international markets. The sales volume of the Group’s deep-processed products increased three-fold to 28,000 tonnes. As a result, export sales rose by 141.6% to RMB1.13 billion.

 

During the review year, the average selling price of aluminium extrusion products stood at RMB23,293 per tonne, up 0.02% when compared to 2011. The Group’s gross profit margin rose 2.6 percentage points to 24.2%, of which the gross margin of industrial aluminium extrusion products climbed 3.4 percentage points year-on-year to 25.0%. 

 

The industrial aluminium extrusion business is the core business of the Group. In view of increasing applications of high-end, large cross-section industrial aluminium extrusion products in China, the Group strengthened its production facilities. In the past two years, the Group installed 10 large-tonnage extrusion presses. As of the end of 2012, it operated 85 industrial aluminium extrusion production lines with annual production capacity of over 900,000 tonnes. Another eight large-tonnage extrusion presses, which are in the final stage of testing, are expected to commence production in 2013. The number of production lines will reach 93 by then, with an annual production capacity exceeding 1,000,000 tonnes. Matching the addition of large extrusion presses is the upgraded smelting and casting equipment. The Group added two sets of  aluminium alloy smelting and casting production lines in the review year. 

 

To further optimize its production capacity for large-section industrial aluminium extrusion products, the Group ordered two 225MN large-tonnage extrusion presses in the review year. Those presses, with deliveries scheduled in 2014, are the largest and the most advanced equipment of its kind globally. 

 

Deep processing business – reopening the door to overseas markets 

The deep processing business, an extension of the industrial aluminium extrusion business with high value-added technology, is a key for the Group to regain access to overseas markets. The new industrial aluminium extrusion product deep-processing centre gradually production at the end of 2012. Installation of the welding equipment imported from Europe for the manufacturing of aluminium alloy vehicle body has completed, enabling the assembly of aluminium alloy vehicle bodies with high efficiency and precision. The Group expects to see increased sales from overseas markets as its range of deep-processed products becomes increasingly diversified, forming a new growth driver of the Group. 

 

The Group continued to forge ahead the development of the aluminium flat rolled project. The production base located in Wuqing District, Tianjin commenced preliminary foundational construction work during the review year. Meanwhile, the Group is stepping up the overseas recruitment of research and development and technical personnel to increase the pace of technological build-up and research and development for aluminium flat rolled products. In the two years ahead, the Group will roll out phase-one construction of the project in force, aiming to complete the building of and commission production capacity of 1.80 million by  2015 and realize the full capacity of 3 million tonnes by 2018.

 

“The industry is developing towards lightness in weight and lower energy consumption. The use of aluminium for the ‘four doors and two covers’ in the automobile sector is in line with this trend as it lowers the weight of the vehicle and reduces emission discharge. Meanwhile, the increasing pace of China’s urbanization process drives the demand for aluminium applications in railway transportation. Against this backdrop, China’s aluminium processing industry is poised to see an industry upgrade to pursue innovation and technological progress instead of merely trying to maximize production volume. China is expected to grow from a volume-driven producer to a technology intensive industry powerhouse of non-ferrous metals. Our vigorous development of technologically advanced aluminium flat rolled products is in perfect tandem with the trends of China’s social and economic development,” Lu said.

 

Going forward, Lu added, “the Group is well positioned with respect to technology, talents, clientele and financial resources to capitalize on China’s enormous demand for high-end aluminium extrusion products.  We will continue to expand our capacity in high-end industrial aluminium extrusion products and develop deep-processed products to enhance our profitability. Meanwhile, the Group will continue to advance its aluminium flat rolled product project in a steadfast manner to foster a long-term growth driver. By sharing resources in upstream raw materials, aluminium alloy smelting and casting technologies, product development technologies and downstream customer bases among the three core businesses, a business model underpinned by resource-sharing and mutually complementary business segments will be formed to provide a sound foundation for the Group’s healthy and sustainable development and to create a sustainable growth and returns for the shareholders.”