Dr Benby Chan, Deputy Chairman & CEO, Asia Aluminum, remarked: "Strong growth in our Group's turnover and net profit for the period was attributable primarily to continued robust demand and improving profit margins for our aluminum products distributed in all major markets, in particular the PRC and the US."

The Group's gross profit margin improved to 26%, as compared with 19% posted in the corresponding period last year. Although aluminum prices remained volatile during the period, the market has absorbed and become better adjusted to the price increase prevailing since 2003. The cost-plus pricing policy continued to enable the Group to manage its exposure to risks associated with aluminum price fluctuations.

Based on geographical distribution, the Group's turnover was 3% Hong Kong (2003: 6%), 83% Mainland China (2003: 83%), 9% North America (2003: 8%), and 5% Asia Pacific and others (2003: 3%). By business line distribution, the Group's turnover was 96% aluminum extrusion and panels (2003: 80%), 3% stainless steel (2003: 19%), and 1% others (2003: 1%).

Aluminum extrusion and panel products remained the Group's core business and main growth driver. Segment turnover rose 47% to HK$1,698 million (2003: HK$1,159 million) as a result of the strong exports to the US and growing domestic demand in the PRC, in particular the penetration into new markets in Zhejiang Province and the north western region of the country. Segment results also posted a significant 123% increase to HK$344 million (2003: HK$154 million) as efforts to diversify into more complex and therefore higher value-added products, such as multiple coating products, began to pay off.

In 2004, the Group commenced construction of a new aluminum extrusion plant in the Asia Aluminum Industrial City in Zhaoqing, Guangdong Province, the PRC. Construction of the new aluminum extrusion facilities is expected to be completed by the middle of 2005. These facilities will commence commercial production in the second half of 2005, providing the Group with an initial annual extrusion capacity in Zhaoqing of about 200,000 metric tons.

Dr Chan added: "Once our new extrusion facilities in Zhaoqing are running at sufficient capacity, we will be able to further enhance the operating efficiency and product mix of our extrusion operations. Together with the new capacity in Zhaoqing, our Group's estimated annual production capacity for extrusion products will increase to 300,000 metric tons. This will enable us to strengthen our leadership as the largest and one of the most profitable aluminum extruders in Asia."

The construction of the aluminum flat rolled products project is now being implemented with site work started and some key contracts already signed, including those for the hot mill and the 5-stand cold mill. The Group expects the 5-stand cold mill to be erected in first half of 2006 while the hot mill will be completed by the end of 2006. Commercial production for the hot rolling mill is expected to begin during the first half of 2007. Asia Aluminum will be one of the first manufacturers in the PRC to produce high-quality aluminum rolled products suitable for a variety of uses that hitherto have been substantially satisfied through imports.

Through a combination of high-quality products manufactured to exacting tolerances and a lower cost structure than international competitors, the Group is well positioned to gain significant market share through import substitution. With a planned annual production capacity of 400,000 metric tons, Asia Aluminum intends to become one of the largest manufacturers of flat rolled products supplying the high-growth market in the PRC and overseas.

In December 2004, the Company successfully issued senior Notes in the aggregate principal amount of US$450 million due 2011 with a coupon of 8%. The Notes were arranged by Morgan Stanley & Co. International Limited and are listed on the Singapore Stock Exchange. The Notes have been rated BB and Ba3 by international rating agencies Standard & Poor's and Moody's respectively.

Dr Chan said: "We issued the Notes in a highly favorable market environment against a background of increasing interest rates and continued credit tightening in the PRC. The Notes Issue is intended to improve and enhance the matching of our Group's expansion plan with its cashflow requirements and debt maturity profile."

The Group's liquidity position remains strong and is in a net cash position. As at December 31, 2004, the Group's cash, bank balances and deposits amounted to approximately HK$6,470 million (June 30, 2004: HK$2,953 million) after the successful issue of the Notes. As at 31 December 2004, total bank loans and other Group borrowings amounted to approximately HK$4,975 million (30 June 2004: HK$1,480 million), of which HK$3,499 million arose from the Notes issue.

About Asia Aluminum
Asia Aluminum Holdings Limited (HKEx: 930) possesses one of the highest and most advanced aluminum processing capabilities in Asia. It is building a new industrial city in Zhaoqing, Guangdong, China, and currently operates five state-of-the-art plants in China with an aggregate annual capacity of 150,000 metric tons, all 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.

Issued by :
Asia Aluminum Holdings Limited

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