Mr Kwong Wui Chun, Chairman of Asia Aluminum remarked: "The Group's growth aspirations have spurred the development of our new industrial base in Zhaoqing. This new base will accommodate planned expansion in the aluminum-extrusion market, where the Group currently enjoys significant competitive advantage, and will support its first moves towards tapping the huge potential of the rolled-products market."

The cost-plus pricing policy enabled the Group to continue managing its exposure to risks associated with aluminum price fluctuations. The slight decrease in gross-profit margin to 23.1% (2004: 23.8%) was mainly attributable to higher energy and other materials costs which could not be entirely passed on to customers. As a result, gross profit edged up by about 13% to HK$787 million and operating profit grew by 11% to HK$589 million.

There was a 182% increase in finance costs to HK$167 million, mostly incurred in connection with the US$450 million senior notes ("Notes") issued in December 2004. A substantial portion of the interest expenses associated with the Notes could not be capitalized because most of the Notes proceeds had not yet been employed as capital expenditure during the period. Consequently, net profit attributable to shareholders for the reporting year incurred a 25% drop to HK$166 million. The 2005 EBITDA was HK$616 million (2004: HK$522 million), representing a 18% increase over 2004.

Dr Benby Chan, Deputy Chairman and CEO of Asia Aluminum Holdings, added: "Planning and investment in the aluminum processing business is long-term in nature, with substantial lead times for the new industrial base from conception to completion. While we are confident of our future profitable growth, performance in the interim will inevitably be affected by the increases in finance and initial start-up costs. Looking back, the Notes were issued in a window of highly favorable market conditions, during a period when interest rates were close to 30-year low. The Group expects the interim high finance costs to be more than compensated for when the new industrial base becomes operational by 2006/2007 and begins to contribute to substantially higher profitability and shareholder value."

Satisfactory sales growth during the year was mainly attributable to increased shipments of the Group's aluminum extrusion products for applications in both architectural and industrial requirements in China and overseas markets. Leveraging on its strong foothold and technological lead in the infrastructure and construction segments, the Group has increasingly secured more orders from the rapidly growing industrial and transport sectors.

Sales in mainland China increased 17% year on year to HK$2,773 million on the back of the country's sustained economic progress, as well as due to healthy investments in infrastructure, commercial buildings and residences, both in the public and the private sectors. There was also a remarkable 52% year-on-year increase to HK$193 million in sales to Asia-Pacific and other regions, boosted mainly by increasing shipments to Japan and Australia.

The commissioning of Asia Aluminum Industrial City will bring substantial new capacity and new capabilities on stream, leading to 300,000 tonnes of extrusion and 400,000 tonnes of rolled-products capacity by 2006 and 2007 respectively. This will also enable further vertical integration and diversification of product range, and allow the Group to exploit synergies across business streams by deploying its skill sets Group-wide.

Equipment installation and trial production of the new extrusion plant has already commenced in phases in October 2005. With commercial production slated during the first half of next year, the Group expects to deliver a total extrusion capability of about 300,000 metric tonnes to meet forecast growth in demand in 2006.

Civil engineering works are now ongoing in Zhaoqing for the building of the infrastructure of the new rolled-products plant. Over 90% of the equipment and engineering contracts have been signed, including the cast house, hot-rolling mill, cold-rolling mill and various construction-design and project-management contracts. Due to adverse weather conditions and prolonged negotiation of some design and engineering contracts, construction work on the project has been delayed by about seven to eight months. However, the critical path of the project hinges mainly on the delivery of the equipment and engineering contracts where the lead time is usually longer than the construction schedule. With equipment and engineering contracts committed much earlier, the Group does not expect any major deviation in the overall project commissioning timeline. Trial production of the rolled products lines is planned to run from second half of 2006 to early 2007 with full commissioning taking place during 2007.

As at June 30, 2005, the Group had total assets of approximately HK$9,421 million, comprising non-current assets of approximately HK$5,432 million and current assets of approximately HK$3,989 million. As at the financial year-end 2005, the Group had cash and bank deposits of HK$2,727 million, deposits held in escrow account of HK$1,654 million and deposits held in collateral account of HK$175 million, against total borrowings of HK$4,324 million, of which about 81% or HK$3,499 million was the HK$ equivalent of the US$450 million Notes. The current ratio was 2.5 as at the balance sheet date, similar to the previous year's figure.

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 Foshan, China with an aggregate annual capacity of 150,000 metric tonnes, all equipped with top-class equipment and facilities to provide one-stop solutions for its customers.

Issued by :
Asia Aluminum Holdings Limited