Continues to Optimize Product Mix, Gross Margin Widens to 33.6%

China Zhongwang Holdings Limited (“China Zhongwang” or “the Company”, together with its subsidiaries “the Group”, stock code: 01333), a world’s leading aluminium fabricated product developer and manufacturer, announced its unaudited consolidated results for the three months ended 31 March 2016 (the “period under review”). During the period under review, the quarterly revenue was approximately RMB3.46 billion. Benefited from the increasing share of high-end aluminium extrusion products in its product mix, the Group achieved gross margin expansion by 4.3 percentage points year-on-year to 33.6%. Net profit reached RMB604 million. 

Mr. Lu Changqing, Executive Director and President of China Zhongwang, said, “In the first quarter of 2016, China’s economy continued to exhibit steady growth. The structural adjustment in the sectors of transportation, machinery and equipment and electric power engineering, has reshaped the promotion and application of high-end aluminum fabricated products. Leveraging its R&D strength, the Group recorded steady growth in the first quarter.” 

Continues to Adjust Production Capacity and Enrich High-end Product Offering

The Group’s major source of revenue are the aluminium extrusion business and deep processing business. During the period under review, the revenue generated from sales of aluminium extrusion business to external customers amounted to approximately RMB2.89 billion with a total sales volume of approximately 147,000 tonnes. The deep processing business recorded revenue of approximately RMB570 million with sales volume of approximately 22,000 tonnes, representing an increase of 78.2% and 89.6% respectively, mainly attributable to the Group’s comprehensive capabilities from independent design to manufacturing and processing, and significant breakthroughs achieved in R&D that resulted in diversified product mix. The average selling prices of industrial aluminium extrusion products and deep-processed products were RMB19,902 per tonne and RMB26,203 per tonne respectively. As the core production lines were operating in full capacity, the Group replaced and reformed the existing equipment to improve production efficiency. Furthermore, the Group continued to explore high-end products and provide ideal light-weight solutions for downstream clients from various sectors, which consolidated its overall profitability. 

Projects under Construction Achieved Smooth Progress, Providing Impetus for the Long-term Development

The first production line of the aluminium flat rolled product project has entered trial production. Currently, the line is producing sample products in small batches that are delivered to potential clients for internal quality test. The production line is now under final testing and optimization before its official production and the R&D team has started industrial accreditation. 

During the period under review, high-precision aluminium and special aluminium alloy project provided 10,000 tonnes of high-quality aluminium alloy products for the Group’s internal production. The first ultra-large 225MN extrusion press is under installation in Yingkou Plant. Special Vehicle Plant, a wholly owned subsidiary of the Group, is constructing two production lines of aluminium-intensive commercial vehicles. Prototypes of semi-trailers and oil tank trucks has been produced for the sales team to pitch potential clients. 

Mr. Lu concluded, “Aluminium flat rolled product and high-precision aluminium projects are the Group’s key move in optimizing supply chain and deepen the synergies between the upstream and downstream businesses, bringing in long-term growth drivers for the Group. In order to unlock the Group’s corporate value, the management announced details of the proposed spin-off of industrial aluminium extrusion business during the period under review. The A-share platform will support long-term development of the aluminium extrusion business and provide the Company with an additional financing platform. The Company and its shareholders will continue to share the growth of the three core businesses, namely industrial aluminium extrusion, deep processing and aluminium flat rolling businesses. The management is actively pursuing to close the transaction as soon as possible with an aim of bringing higher value to our shareholders.”