Mr Paul Cheung Kwok Wing, Chairman, Kingboard Chemical Holdings Ltd. said: "In the financial year 2004, we reaped strong results of past hard work and laid down a new foundation for excellent growth prospects. Not only our laminate division had been able to fully capitalize on the recovery of the electronics industry and continued to gain market share with competitive vertically integrated production facilities, several major initiatives implemented during the year such as acquiring Elec & Eltek group, increasing our controlling stake in Techwise Circuits to 90%, and developing a few natural resources based chemical plants, our Board is fully convinced, will enable the Group to achieve more balanced and sustained growth in the long term."

The laminate division achieved robust performance in 2004. The overall recovery of the electronics manufacturing industry continued its momentum until there were modest inventory adjustments throughout the entire supply chain in the fourth quarter. Nevertheless the lack of investments in the laminate and its related upstream industries particularly glass yarn in the preceding cyclical downturn supported a favorable supplier market throughout the year. Given the Group's persistent focus on capacity growth and capability upgrading in the last few years, it had successfully ridden on the current uptrend. The Group's average volume monthly shipment exceeded 5.1 million square meters, more than double the level achieved during the industry's previous peak in year 2000. Partly attributed to the pricing uptrend, the external sales of laminates grew 47% and EBIT margin (earnings before interest and tax), despite increasing materials costs, improved to 25% from 16% a year ago.

After the market's brief softness in the fourth quarter of last year, demand for laminates rebounded robustly in the last few weeks. The recent close down of an overseas major paper laminate supplier helped the industry's consolidation. Also the commencement of the Group's third glass yarn furnace eases the bottleneck in its glass epoxy laminate production. After last year's rapid expansion, the Group plans to increase the monthly capacity by a modest 15% to reach around 8.2 million square meters but will invest more aggressively in fabricating high performance, advanced laminate materials in the next few years.

The Group had successfully made major inroads on the printed circuit board market. Following the acquisition of a controlling stake in Elec & Eltek group at the end of November, Kingboard is ranked the largest printed circuit board group in China and the eighth in the world based on the pro-forma combined revenue of around US$600 million in 2004. The printed circuit board division, without taking in contribution by Elec & Eltek, continued to achieve double-digit volume growth with notable strength in multi-layer (i.e. four layers or above) which saw a 63% increase in volume. In dollar terms, sales organically soared 49%. However, different from the demand and supply balance in the laminate industry, the selling price of printed circuit boards had increased by a modest range of 3-5% compared with double digit increases in most of the material costs. However with the product mix successfully shifted to more profitable multi-layer boards, EBIT margin, excluding Elec & Eltek, maintained at around 7%.

Integrating Elec & Eltek's operation into the Group has been well in progress. It is certainly bringing significant synergies such as enhancing vertical integration and economies of scale as well as complementing each other's customer base. As the largest printed circuit board operation in China, the Group shall be the prime beneficiary of the global outsourcing trend. The Group expects the division to have the monthly capacity reaching 3 million square feet for single-side and 6.5 million square feet for double side and multi-layer by the end of the current year.

The growth of the chemical division continued to be on track with both internal and external sales increasing by more than 70%, and EBIT margin maintained at around 6%. In the year we have strengthened our market position in formalin and hydrogen peroxide. The acquisition of a hydrogen peroxide plant in Gaomi, Shangdong province and the set-up of a formalin plant in Changzhou, Jiangxu province have enabled the Group to widen its customer coverage outside the Guangdong province. The melamine plant which was completed in early 2004 had successfully overcome some initial teething problems and received strong order book from external customers. The coke-methanol plant had completed its first phase and started trial production of coke smoothly last October.

Several major chemical projects are currently underway. The expansion of caustic soda plant in Hengyang of Hunan province with pent-up demand is on schedule, and its monthly capacity will triple by the middle of the current year. The coke-methanol plant in Hebei province is running at full production capacity of coke and is expected to commence methanol production in June. The construction of two methanol plants in Chongqing and Hainan province is progressing well and scheduled to complete by the end of 2006. In addition a phenol & acetone/bisphenol-A plant is being set up in the petrochemical district of Huizhou, Guangdong province which has a reliable local supply of key chemical feedstock.

About Kingboard Chemical
Kingboard Chemical Holdings Limited (SEHK: 148) is one of the world's largest manufacturers of laminates and printed circuit boards, operating more than 40 plants in China, vertically integrated with in-house capability for the production of copper foil, bleached kraft paper, glass yarn, glass fabric, formalin, hydrogen peroxide, epoxy resin and TBBA. The Group is very delighted to have been included in the MSCI World Index since May 2004 and consecutively for the past five years chosen by the Forbes as one of the world's best small companies in October 2004.

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