The exceptional gain of HK$52 million was derived from the additional consideration recently paid by Indalex UK Limited in relation to its acquisition from the Company of a 26% interest in Asia Aluminum Group Limited ("AAG") in June 2001. This is due to the fact that AAG and its subsidiaries have attained the financial thresholds for the year ended June 30, 2002 as stated in the agreement underlying the acquisition and accordingly an additional consideration of HK$52 million was entitled by the Company pursuant thereto.

Mr Kwong Wui Chun, Chairman, Asia Aluminum Holdings noted: "Our leading position in the construction and infrastructure sector in China and Hong Kong, with strong leverage on our highly competitive cost base on the Mainland, has enabled us to continue delivering encouraging results. To maintain the impetus for growth, we have furthered our product and market diversification initiatives, in addition to efforts to expand production capacity, sales network and market share."

The diversification plan envisages the Group's advances into non-construction sectors with the introduction of aluminum products for application in the media, transportation, consumer household and industrial areas. "We have been successful in clinching key contracts from several major reefer container manufacturers for the production of frozen goods containers," added Mr Kwong.

Recent construction-sector projects of the Group include the Beijing Grand Opera House, New Guangzhou Huadu Airport, Hangzhou Opera House, the People's Great Hall refurbishment, Shanghai Walton Plaza and Shanghai Xintiandi in China, as well as the Science Park, redevelopment of Mongkok "Bird Street", Enterprise Square Phase III in Kowloon Bay, Kowloon Station Phase II and Thomson Road development in Hong Kong. In addition, a number of supply contracts are currently under negotiation, for example the Disneyland Park in Hong Kong.

Through full integration of the two newly acquired plants and upgrading of facilities, the Group advanced its annual aluminum extrusion capacity by 17% to the current 140,000 metric tonnes. Sales of aluminum products in the first half amounted to HK$1.047 billion, an increase of 24% from the last corresponding period. The Group has slowed down its stainless steel operation due to unattractive returns from the highly competitive market in China. Sales of stainless steel products therefore declined 43% to HK$47 million.

Dr Benby Chan, Managing Director of Asia Aluminum Holdings said, "Sales to the PRC domestic market contributed 77% of our first-half revenues. While the outlook for China continues to be very promising, with the influx of significant foreign direct investments and the line-up of national events and Government's Go-West and Housing Reform initiatives, we maintain our long-term approach to achieve a well-balanced geographical spread and product portfolio to minimize risk exposure. To this end, we aim to achieve a 50/50 sales breakdown and to increase the contribution of higher-margin consumer household and complex paint-coated products in the medium term."

To drive sales growth in North America, Indalex agreed with Asia Aluminum Holdings to allow it to handle sales orders from customers in this market directly.

Dr Chan added: "To effect better control of inventories and logistics costs, we are in the process of developing a new supply chain system, phase one of which has been implemented. In addition, negotiations with several smelters and suppliers will be finalized in the next few months regarding new procurement and production arrangements to achieve greater cost-savings. As part of our efforts to enhance operating efficiency, we are also cautiously considering centralizing all five existing factories in Nanhai District, Guangdong Province into one single production complex."

As at December 31, 2002, the Group had net assets of HK$1,926 million. Cash and bank balances and total borrowings stood at HK$1,639 million and HK$880 million respectively. After the period end, all the outstanding convertible bonds have been exercised.

About Asia Aluminum
Asia Aluminum Holdings Limited (SEHK: 930) is the largest aluminum extruder in Asia, operating five extrusion plants in Nanhai District, Guangdong Province, PRC with a total annual production capacity of 140,000 tonnes. The Group has established an equity alliance with Indalex, the second largest aluminum extruder in the US. It was named one of the "World's Best 200 Small Companies for 2002" by Forbes Global.

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