Mr Raymond Cheng Chor-kit, Chairman of Kin Yat Holdings, said: "The past six months continued to be a very difficult one for the toys industry, amidst mounting competition, sustaining pricing pressure, higher material costs and shortages in power and labor. In addition to implementing restructuring measures to enhance competitiveness and exploring diversification opportunities of potential, the Group made a strategic move to invest in the development of materials to expand its income sources."

The Group invested $20 million last year to launch a new business segment that is less susceptible to the cyclical nature of the consumer market. The development of materials primarily for use in Cathode Ray Tube, Plasma and Liquid Crystal Display has every potential of becoming a strong income stream for the Group. Despite its infant development stage, the segment produced a profit of around HK$-2 million during the period, which is within the Group's expectation.

In the first half the toys and motors divisions contributed 58.6% and 29.3% respectively of group turnover.

For the toys segment, the Group was unable to pass the cost increases to customers ascompetition was very keen. Shortage of electricity supply also caused interruption to production activities. In addition, labor supply continued to be tight and overtime work was common, resulting in delivery delays and higher costs. Such difficult market conditions affected the division's profitability. Loss was incurred despite a stable turnover during the period.

Looking forward to the second half, the toys division will continue to focus on low to mid-priced items. It has secured orders for certain movie related items with bulk volume, allowing greater benefits from the scale of economy. The division is cautiously optimistic of an improved performance in the second half of the year.

The motors division continued to derive the majority of its business activities from the toys sector at this stage. The unfavorable market conditions and cut-throat price competition of the toys sector had a material impact on its performance. The substantial cost hikes in copper, steel and other materials also wiped out part of the division's profit margin.

Previous efforts to diversify into other product segments were deferred by persistent labor shortage and higher electricity cost. As a result, the motor division experienced a slight decrease in turnover, but a more optimum product mix helped generate a slight improvement in profit margin. During the period, the division secured the ISO/TS16949 certification which is a pre-requisite for selling motors for automobiles. This will signify a new phase of active development of the automobile line.

The operating environment will remain challenging for the remainder of the financial year. However, we will further step up our efforts to enhance operating efficiency, build up economy of scale, strengthen marketing and improve profitability. With our production capabilities, product excellence and industry expertise, we believethe Group Is able to manage the tough situation, and strive for a brighter future.

The Group continued to maintain a strong financial position, with cash in hand of HK$54 million and a healthy gearing ratio of HK$6.9% as at September 30, 2004. About Kin Yat Holdings
Kin Yat Holdings Limited (SEHK: 638) is an industrial group with a niche in electronic and mechanical productions. It has a stretch of toy, micro motor and CDR manufacturing businesses, all based on its strong cost-effective engineering and production platform in China. Headquartered in Hong Kong, Kin Yat operates two production centers in Shenzhen and Shaoguan, China.

Six months ended September 30,
	2004	2003
	HK$ '000	HK$ '000
Turnover	406,591	395,468
Toys and related products	238,195	244,238
Motors (including sales to Kin Yat Group)	119,285	124,180
Motors (sales to Kin Yat Group)	(5,048)	(8,529)
Electrical household appliances	37,997	31,832
Material development	16,162	3,747
Net Profit Attributable to Shareholders	12,625	42,405
Segment Results from operating activities
Toys and related products	(5,039)	16,113
Motors (including sales to Kin Yat Group)	26,854	31,138
Electrical household appliances	(616)	662
Material development	1,986	621
Interim dividend per share	HK0.5 cents	HK2.0 cents
Earnings per Share
- Basic	HK3.12 cents	HK10.48 cents
- Diluted	HK3.11 cents	HK10.44 cents

Issued by :
Kin Yat Holdings Limited

Through :
t6.communications limited
Angus Ho or Winnie Pang
tel: 2511 8388 / fax: 2511 8238
email: enquiry-at-t6pr.com (use "@" to replace "-at-")
URL : http://www.t6pr.com