China Zhongwang : Posts Adjusted Net Profit of RMB1.51 Billion in 1H 2016

China Zhongwang Posts Adjusted Net Profit of RMB1.51 Billion in 1H 2016

* * *

First Aluminium Flat Rolling Production Line to Commence Production This Year

Driving Long-term Growth

China Zhongwang Holdings Limited ('China Zhongwang' or the 'Company', together with its subsidiaries, the 'Group', stock code: 01333), a world's leading fabricated aluminium product developer and manufacturer, announced its unaudited consolidated results for the six months ended 30 June 2016 (the 'Period under Review'). During the Period under Review, the Group's external sales volume increased by 6.8% year-on-year to approximately 368,000 tonnes. The total revenue amounted to approximately RMB7.68 billion. As the revenue contribution from high-end products increased, gross margin expanded by 4.5 percentage points, year-on-year, to 36.7%. Adjusted net profit rose by 0.5% to RMB1.51 billion when compared to the corresponding period of last year. Adjusted earnings per share were approximately RMB0.21. To reward shareholders' support, the Board has declared an interim dividend of HK$0.11 (approximately RMB0.09) per share to the shareholders of the Company.

Mr. Lu Changqing, President and Executive Director of China Zhongwang,said, 'The Chinese Government actively promotes transformation and upgrading of industries, creating new opportunities for green and environmentally friendly fabricated aluminium products. In the first half of 2016, the Group continued to achieve business growth by optimizing its product mix, upgrading production capacity, and investing in R&D and innovation. The first production line of the Tianjin aluminium flat-rolled product project is undergoing final stage of equipment testing, and has successfully produced the widest ultra-large aluminium alloy slabs and plates during the Period under Review, setting new records in China and Asia. In addition, the spin-off and listing of the Group's aluminium extrusion business on the A-share market is making further progress. The circular on the proposed spin-off has been dispatched to shareholders, and the Group will hold an extraordinary general meeting soon. The spin-off will enhance the Group's corporate value in the long term with an additional financing platform.'

Aluminium Extrusion Business-

Optimize Product Mix and Upgrade Capacity to Enhance Profitability

During the Period under Review, the Group effectively strengthened its overall profitability as it continued to optimize its product mix. Gross margin of the aluminium extrusion business increased from 29.5% for the corresponding period in 2015 to 31.8% for the Period under Review. The installation of an ultra-large 225MN extrusion press ordered in 2012 is underway. It is expected to commence production in 2017. The other press has been delivered to the plant for installation. Orders for 99 extrusion presses were placed during the Period under Review, of which 19 were large-scale presses of 75MN or above, among which one was of 175MN and four of 125MN.

Deep Processing Business-

Transform from a Material Supplier to an Integrated Light-weight Solutions Provider

The deep processing business is one of the Group's growth drivers. During the Period under Review, sales volume of the deep processing business surged 64.1% year-on-year to approximately 47,000 tonnes, contributing approximately RMB1.26 billion in revenue, an increase of 57.9%. Gross margin increased from 34.9% for the corresponding period in 2015 to 36.5% for the Period under Review. With the light-weight development in the transportation sector, the Group continued to augment sales of the existing products of large parts, such as vehicle bumpers, structural parts for passenger cars and skirtboards for high-speed trains, while increasing the proportion of finished products with higher added value, such as train carriages and the body frames for new energy buses. The strong capability of product and process design team has enabled the Group to make preemptive moves in an ever-changing market.

Enhance Industry Chain Extension, Strengthen Competitiveness in the Long Term

The first production line at the Tianjin flat rolling plant will commence production this year. It is currently processing small-volume orders from potential customers on a trial basis. During the Period under Review, the smelting and casting mill successfully produced aluminium alloy slabs of 2,670mm in width, which set China's new record; and the hot rolling mill successfully produced aluminium alloy plates of 4,300mm in width, setting a new record in Asia. Furthermore, the project was awarded three quality management system accreditations, including the management system certificates for aerospace and automobile industries, laying a foundation for the products to enter the high-end market.

Looking into the future,Mr. Lu concluded, 'In view of the increasing trend of material upgrade in the transportation sector and equipment upgrade in the industrial sector, the Group has capacity expansion plans to fulfil the increasing downstream demand. Leveraging its technology, R&D and product design edge, China Zhongwang will capitalize on the synergy of its three core businesses, namely industrial aluminium extrusion, deep processing and aluminium flat rolling, to strengthen its foothold as a leading developer and manufacturer of high-end fabricated aluminium products and reward shareholders with positive returns.'