Sales growth was mainly attributable to the Group's delivery of higher-added-value aluminum extrusion products to meet sophisticated architectural design requirements. And as the price of aluminum became less volatile in the second half, and with customers becoming better prepared and more accustomed to cost increases after the unprecedented price hikes prior to the end of 2003, the Group was able to recover its margin.

Mr Kwong Wui Chun, Chairman of Asia Aluminum said: "We faced unprecedented challenges in the first half in an exceptionally volatile commodity price environment rarely experienced by the aluminum industry over the past decade. Nevertheless, our strategy of strengthening strategic relationships with clients by absorbing part of the increased material costs produced fruitful results in the second half and laid a solid foundation for future growth."

While sales in the PRC were up by 27% year-on-year, overseas sales, in particular to the North American market, also grew by an impressive 131%. Sales to the PRC, Hong Kong and North America generated 80%, 5% and 11% respectively of group revenues. Business segment turnover contributions from aluminum extrusion and panels, stainless steel and design and testing services were 87%, 12% and 1% respectively.

Dr Benby Chan, Deputy Chairman and CEO of Asia Aluminum pointed out that: "Both the Government and the trade agree that only the lower and middle sectors of the metals industry in China are overheating. Oversupply has been mainly caused by the fragmented state of the industry, companies specializing in higher value-added products are still expanding capacity. Our established business strategy is to increase economies of scale by capacity expansion. Next year, this initiative will be furthered as we move to our new production base. Further vertical integration, upstream into billet making, and downstream into semi-finished products, is also expected to improve overall margins. To add further value to our production capabilities, we are also seeking new applications in the transportation, outdoor furniture and home improvement sectors."

In view of the proposed relocation of group facilities to the new production base in Zhaoqing, China, the Group implemented a modest capacity increase of 7% through the addition of four small extrusion production lines in the first half of 2004, increasing the Group's capacity to 150,000 metric tons, which continues to be the largest capacity in Asia.

Dr Chan continued: "The construction of our new aluminum extrusion facilities in the 'Asia Aluminum Industrial City' in Zhaoqing, Guangdong Province, China, is substantially proceeding as scheduled. Building of the first extrusion workshop is expected to be completed before the year end of 2004, followed by installation of the extrusion and surface-finish production lines that the Group had ordered from a number of the world's leading suppliers in Japan, Italy and the US, with an aggregate initial extrusion capacity of about 200,000 metric tons. We aim to commence production at the new extrusion facilities in Zhaoqing by mid-2005."

A new dies and mould workshop will be built in the Zhaoqing industrial city as an integral part of the new extrusion facilities. The new workshop is scheduled to commence operation by the second half of 2005. As previously announced, a 400,000 metric-ton flat-rolled products project is also being developed at the Zhaoqing industrial city site.

As at June 30, 2004, the Group had total assets of approximately HK$5,620 million, comprising non-current assets of approximately HK$1,430 million and current assets of approximately HK$4,190 million. As at the year end, the Group had cash and bank deposits of HK$2,953 million, against total borrowings of HK$1,480 million. The consolidated net cash position, being cash and bank deposits less bank borrowings, amounted to HK$1,473 million (June 30, 2003: HK$989 million).

The Group's total debt to total capital ratio (debt/shareholders' funds) as at June 30, 2004 was 52%, a slight increase from last year's 50%. The current ratio was 2.6 as at the balance sheet date.

About Asia Aluminum
Asia Aluminum Holdings Limited (SEHK: 930) possesses one of the highest and most advanced aluminum processing capabilities in Asia. It operates five state-of-the-art plants in China with an aggregate annual capacity of 150,000 metric tons and equipped with top-class equipment and facilities to provide one-stop solutions for its customers. Through an equity alliance with Indalex, the second largest aluminum extruder in North America, the Group has made inroads in expanding international sales and product portfolio.

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Asia Aluminum Holdings Limited