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Hong Kong, April 17, 2008 - Leading high value-adding steel manufacturing company Shougang Concord International Enterprises Company Limited (HKEx: 697) yesterday announced that in the year ended 31 December 2007, the Group recorded a sharp 77.5% year-on-year increase in consolidated turnover to HK$11,477.9 million. As a result of higher sales volume and selling prices in the steel manufacturing segment, the Group posted a 5.3-time increase in net profit attributable to shareholders to HK$1,404.2 million. Basic and diluted earnings per share were HK22.1 cents and HK21.1 cents respectively.
Overall gross profit margin improved from 13.3% last year to 20.2%, principally due to higher gross margin of 14.8% of the steel manufacturing segment, while that of the shipping segment also rose to 60.6%.
The Group declared a final dividend of HK4 cents, up 0.9 time from 2006, and a special dividend of HK4 cents.
Mr. Cao Zhong, Managing Director of Shougang Concord International, said: “Our steel manufacturing segment has enjoyed rapid developments. In the foreseeable future, strong demand for high value-adding heavy plates in Asia should continue, especially propelled by China and Korea. We will become the key beneficiary in China’s undersupply, in terms of both quantities and quality, of high value-adding heavy plates. Although the uncertainties surrounding the global economy has elevated, our integrated operating model will help us mitigate the fluctuations of any single sector. We will continue to focus on core businesses to bring higher returns for shareholders.”
The Group operates its steel manufacturing segment through wholly-owned Qinhuangdao Plate Mill and 76%-owned Qinhuangdao Shouqin Metal Materials Co., Ltd. (“Shouqin”) (since February 2007). This segment contributed 79% of the Group’s turnover (2006: 70%).
The segment reported significant scale expansion following the implementation of the heavy plate hot rolling facility of Shouqin in April 2007. During the year, the steel manufacturing segment produced 2.07 million tonnes (mt) of steel plates and 2.43 million mt of steel slabs, up 1.5 times and 25.0% respectively. Due to the tight supply of heavy plates, unit selling price has continued to rise, resulting in a 6.3-time year-on-year increase in profit contribution by this segment.
Shouqin, a joint-venture integrated steel facility 20% held by Hyundai Heavy Industries, has an annual production capacity of 1.80 million mt in high value-adding heavy plates, with applications covering shipbuilding, petrochemical and machinery manufacturing industries. In 2007, Shouqin recorded a 86.1% year-on-year increase in turnover to HK$9,141.5 million (before elimination of intersegment sales), and a 15.6-time increase in net attributable profit to HK$731.8 million. Shouqin has an encouraging 2007, and is expected to keep its strong pace of growth in the next few years, with deep processing facilities nearing completion to yield higher efficiency gain of its existing assets.
Turnover of Qinhuangdo Plate Mill was HK$3,908.5 million (before elimination of intersegment sales) for the year, up 33.7%. Net attributable profit also rose 1.4 times to HK$201.5 million. Sales volume of major steel products increased 6.7% to 812,000 mt, with average selling price also increasing 17.5% to about HK$4,354 (RMB 4,231) per mt.
In order to secure upstream resource assets, Shougang Concord International invested HK$186.8 million (A$28 million) in June 2007 for 6.4% equity interest in Australasian Resources Limited (“ARH”). The purpose of the investment is to support ARH’s feasibility studies into an iron ore mine in Pilbara Region of Western Australia, a move that will give the Group the opportunity to work more closely with ARH to secure iron ore resources.
The shipping operations, which comprise two capesize dry bulk vessels for iron ore and coal transportation, recorded a 63% year-on-year increase in turnover to HK$373.8 million. The segment’s net attributable profit also surged 1.9 times to HK$227.3 million. Favorable charter hire income trends underpin the segment’s ongoing growth and performance.
The electricity generation segment, operating the 51%-owned power plant in Beijing, reported turnover of HK$481.2 million, up 13.3% year on year. The Group’s share of net attributable profits showed a moderate increase of 15.3% to HK$34.0 million.
The Group’s share of net profit from its interests in Shougang Concord Century Holdings Limited (HKEx: 103) rose 11.0% to HK$23.3 million despite the slight drop in equity proportion from 22.5% to 20.7%. Shougang Century enjoyed a marked increase in sales of steel cords with turnover rising by 10.9% to HK$436.7 million. Confident of the future development of Shougang Century in the steel cord sector, the Group has signed a share subscription agreement to increase its stake in Shougang Century to 36.4%. This transaction was completed in the first quarter of 2008.
As at 31 December 2007, the Group had cash and bank deposits of HK$3,326 million (2006: HK$1,855 million), with gearing (net debt to shareholders’ equity) decreasing to 28%.
The Company has also recently pledged efforts to increase its capital contribution to its steel plants in Qinhuangdao City, Hebei province. In a move to enhance margins it has also announced plans to develop further value-added services such as heat treatment facilities and downstream processing of steel-plates. Such demand-driven expansion plans will continue to underpin the Company’s growth momentum.
About Shougang Concord Issued by : Through :
Shougang Concord International Enterprises Company Limited (HKEx: 697) is principally engaged in the manufacture, sales and trading of steel products, shipping and in electricity generation. The Group also holds about 36% interest in steel cord producer Shougang Concord Century Holdings Limited (HKEx: 103).
Shougang Concord International Enterprises Company Limited
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