Hengan International : 2016 ANNUAL RESULTS ANNOUNCEMENT

【For Immediate Release】

Financial Highlights

Remarks: *Continuing operations excluding Qinqin Group

(21 March 2017 - Hong Kong) - Hengan International Group Company Limited ("Hengan International" or the "Company", SEHK stock code: 1044, together with its subsidiaries, the "Group") announces today its annual results for the year ended 31 December 2016.

On 8 July 2016, Qinqin Foodstuffs Group (Cayman) Company Limited ("Qinqin Group", SEHK stock code: 1583) was spun off from the Group and listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange"). After spinning off the food and snacks

- Con't -

business, the Group will focus on the production, distribution and sales of its personal hygiene products in the future.

For the year ended 31 December 2016, excluding Qinqin Group, the Group recorded revenue of approximately RMB19,277,397,000 (2015: RMB18,662,576,000), an increase by about 3.3% compared with that of last year. Overall profit attributable to shareholders increased by about 10.3% to approximately RMB3,596,821,000 (2015: RMB3,259,863,000). The Board of Directors declared a final dividend of RMB 1.10 per share for the year ended 31 December 2016 (2015: RMB0.96).

Despite intensifying market competition, the prices of major raw materials maintained at a low level for most of the year. Coupled with the Group's product optimization measures, gross profit margin for continuing operations rose to about 48.8% (2015: 47.9%). Distribution costs and administrative expenses for continuing operations increased to approximately 27.0% (2015: 24.6%) of the Group's revenue for continuing operations, which was attributable to increase in marketing and advertising expenses, as well as the rise in transportation costs as a result of the implementation of new regulations on road transport in September, which imposes strict limitations on the loading capacity of cargo vehicles.

The effective tax rate for continuing operations decreased to approximately 23.7% (2015: 28.6%). The Group provided a large amount of dividend withholding tax in the second half of 2015 for the dividend which would likely be remitted out of mainland China in the foreseeable future. As such, the provision of dividend withholding tax required for 2016 became lower.

Mr. Sze Man Bok, Chairman of Hengan International, said, "In 2016, the global economic recovery remained muted, with the Brexit referendum bringing uncertainties to the economy of the euro zone. China's economy recorded the lowest growth rate in twenty six years, according to China's National Bureau of Statistics, China's gross domestic product grew by 6.7% in 2016, down 0.2 percentage points from the previous year. Renminbi depreciation trend has not yet stabilized, with the currency fell 6.6% against the US dollar in the year under review. Faced with turbulent external environment, coupled with the slowdown in China's economic growth and volatile exchange rate, the operating environment was challenging."

Accelerating urbanization and rising national income have raised overall living standards and spurred consumption of personal hygiene products. However, the intense competition as a result of the high market penetration of the sanitary napkins market in China has to a certain extent limited the sales growth of the Group's sanitary napkin business. During the year, revenue of the

sanitary napkin business grew by approximately 6.2% to approximately RMB6,568,885,000, which accounted for around 34.1% (2015: 33.1%) of the revenue from continuing operations. Despite the fierce market competition, the gross profit margin remained stable at approximately 72.6% (2015: 72.6%), as a result of the persistently low prices of major raw materials and petrochemical products during the year and benefit from the optimized product portfolio as well as the active expansion of online exclusive product line.

In addition to the Space 7 Wow + Miow series and Space 7 Candy series launched in year 2016, the Group will launch a series of new e-commerce and Wechat store exclusive series, and continue to develop online sales channels to meet the needs of the market. In addition, the Group will continue to optimize its product portfolio and launch new and upgraded products with an aim of increasing the mid-to-high end and high end market development and maintenance. It is expected that sales will grow steadily in 2017.

With increasing hygiene awareness in China, the addressable market of high-quality tissue paper has extended from first- and second-tier cities to third- and fourth-tier cities. China's tissue consumption per capita still lags behind that of developed countries, implying enormous market potential. Even though the industry still faces overcapacity, the Chinese government's implementation of environmentally friendly manufacturing regulations will help eliminate small and medium enterprises that fail to meet the standard, and is expected to further enhance the industry concentration and benefit the Group and other large-scale manufacturers in the long term.

During the year, revenue from the Group's tissue paper segment increased by about 4.3% to approximately RMB9,066,499,000, accounting for approximately 47.0% (2015: 46.6%) of the Group's total revenue from continuing operations. Gross profit margin increased to approximately 37.9% (2015: 35.6%) due to the persistent drop in price of wood pulp, a major raw material for tissue paper production and the optimized product portfolio.

The Group's annualized production capacity was approximately 1,140,000 tons, during the year, it is expected to increase to approximately 1,430,000 tons by the fourth quarter of 2017 or the first half of 2018. The Group will expand its production capacity according to the market conditions and sales performance in the future. In addition, the Group will continue to launch new and upgraded products, the packaging and quality of which will be further enhanced. The group will also step up its efforts in marketing and brand promotions, sales performance in 2017 is expected to achieve steady growth.

In light of urbanization, coupled with increasing personal hygiene awareness and pursuit of higher living standards, the demand for disposable diapers continued to rise. However, the market penetration of disposable diapers is still low as many Chinese people still do not regard diapers as a necessity, which implies the Chinese diaper market still has massive growth potential.

During the year, competition in the diapers market intensified. The entrance of a large number of small and medium manufacturers into the market further intensified the price competition of low- and mid-end products. On the other hand, with the rise of cross-border e-commerce in recent years, foreign brands hit the Chinese market and affected the sales of the Group's mid-to-high-end diapers. As a result, revenue from the sales of diapers for the year ended 31 December 2016 decreased by approximately 12.3% to approximately RMB2,150,252,000, accounting for approximately 11.2% (2015: 13.1%) of the Group's revenue from continuing operations.

During the year, prices of major raw materials and petrochemical products continued to remain at a low level, together with the optimized product portfolio, gross profit margin rose to approximately 50.8% (2015: 49.3%). During the year, the Group's disposable diapers products were accredited several safety certificates from domestic and overseas organizations. These certificates assured the quality of the Group's diaper products, strengthened the public's confidence in the Group's products and enhanced the competitiveness of its products.

China has fully implemented the "two-child" policy, a baby boom will gradually emerge in the long run, which in turn bringing huge development opportunities to the domestic diaper market and driving the long-term growth of the diaper market. Besides, the Chinese government has imposed tax on cross-border e-commerce transactions in 2016, which will enhance the competitiveness of the Group's products. The Group will continue to upgrade existing products, develop high-end products and further expand in maternity stores and online sales channels in order to outshine the competition with quality products.

On 8 July 2016, Qinqin Group (SEHK stock code: 1583) was spun off from the Group and listed on the Main Board of the Stock Exchange. After spinning off the food and snacks business, the Group will focus on the production, distribution and sales of its personal hygiene products in the future.