The Group did not declare an interim dividend in order to maintain flexibility to support further investment in the future, including the expansion of the Asia Aluminum Industrial City in Zhaoqing, Guangdong Province, the PRC. In addition, in light of the tight restrictions on distributions imposed by the covenants on the US$450 million Notes issued on December 23, 2004, the Board does not envisage declaring dividend in the foreseeable future.
Dr Benby Chan, Deputy Chairman & CEO, Asia Aluminum, said: "We started the fiscal year 2005/06 facing a challenging operating environment with higher interest rates and volatile metal prices. The Group's overall gross profit margin declined to 22% from 26% of the comparable period due to escalating manufacturing overheads, especially other material costs, although this was partly mitigated by the Group's enhanced economies of scale as well as a continued shift of product mix to higher-value categories and industrial extrusion products."
In terms of geographical spread, Hong Kong provided 2% (2004: 3%) of the Group's turnover, while Mainland China accounted for 81% (2004: 83%), North America 10% (2004: 9%), and Asia Pacific and others 7% (2004: 5%). By business line distribution, aluminum extrusion and panels contributed 97% (2004: 96%) to the Group's total turnover and stainless steel 3% (2004: 4%).
Sales of aluminum extrusion and panels contributed to a 13% increase in segment turnover to HK$1,917 million, spread across geographical regions. Segment results remained stable at HK$330 million following initiatives to improve efficiency and cut costs, as well as continued efforts to advance into downstream processes, such as surface treatments and multiple coatings. By leveraging its strong market position in aluminum extrusion, the Group made further inroads in tapping new end-markets in the industrial and transportation sectors.
The commissioning of the Industrial City will add approximately 200,000 metric tons of aluminum extrusion capacity and provide for the introduction of 400,000 metric tons of rolled-products capacity beyond the current fiscal year. Part of the new production base has also been earmarked to incorporate expanded capabilities in downstream processes and to enable the development of a broader offering of aluminum products.
The installation and testing of machinery imported from Japan, Italy and the US have been progressing at the new extrusion plant. The construction of the new rolled products plant is also ongoing at the Industrial City in Zhaoqing. The rolled products project experienced some initial delay owing to adverse weather conditions and prolonged negotiations over some design and engineering contracts. Efforts are now focused on trying to maintain the overall project commissioning timeline.
"The Group continues to face a challenging operating environment with aluminum prices close to historical high. At the same time, demand for the Group's core products is stable. Research and development and capacity expansion will continue to be closely aligned with the needs of the Group's core businesses and for tapping new growth areas. The Group is focused on improving manufacturing processes and developing new product applications for a more diversified range of markets and customers," continued Dr Chan.
As at December 31, 2005, the Group had aggregate cash, bank balances and other deposits of HK$4,081 million (June 30, 2005: HK$4,556 million); against total borrowings of HK$4,456 million (June 30, 2005: HK$4,324 million), of which approximately 76% or HK$3,394 million was the HK$ equivalent of Notes stated at amortized cost (with a notional amount of approximately US$450 million). The total debt to total capital (debt/shareholders' funds) ratio of the Group as at December 31. 2005 was 145% (June 30, 2005: 145%).
Financial Highlights| For the six months ended Dec 31, | ||
| 2005 | 2004 | |
| HK$ '000 | HK$ '000 | |
| Turnover | 1,984,104 | 1,762,862 |
| Gross Profit | 445,308 | 449,692 |
| Profit from operating activities | 352,961 | 348,119 |
| Net profit attributable to equity holders of the parent | 125,991 | 152,253 |
| Earnings per Share | ||
| - Basic | 3.88 cents | 4.80 cents |
| - Diluted | 3.88 cents | 4.76 cents |
| Interim dividend per share | Nil | Nil |
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.