Zhongwang reports 71.7pc jump in profit

PUBLISHED : Wednesday, 26 August, 2009, 12:00am
UPDATED : Wednesday, 26 August, 2009, 12:00am

China Zhongwang Holdings, the mainland's largest maker of aluminium extrusion products, reported a higher than expected 71.7 per cent jump in first-half profit as it sold more high-margin products.

Net profit for the six months to June at the Liaoning-based aluminium processor increased to 1.62 billion yuan (HK$1.84 billion) from 946.5 million yuan a year ago. That was 20 per cent higher than the 1.35 billion yuan earnings it forecast.

Sales rose 9.1 per cent to 6.33 billion yuan.

The company, which raised HK$9.8 billion in a Hong Kong initial public offering in May, said the earnings growth was prompted by higher sales volume and processing fee.

From January to June, it sold 50 per cent more industrial aluminium extrusion products to 159,478 tonnes while sales of construction aluminium extrusion products fell 32 per cent to 86,041 tonnes.

Processing fee charged to its industrial clients grew to 18,500 yuan a tonne in the period from an average of 15,600 yuan for the full-year 2008, while that for construction clients rose to 7,700 yuan a tonne from 6,600 yuan, said chief financial officer Vincent Cheung Lap-kei.

He said demand for the company's products, especially from the transport, machinery equipment and infrastructure sectors, was strong and there was room for further increase in the second half.

Industrial products accounted for 75 per cent of Zhongwang's revenue in the first half while construction products accounted for 25 per cent.

The jump in processing fee and increased sale of high-margin industrial products helped lift the company's overall gross margin to 39.7 per cent from 25.7 per cent last year.

Vice-president Lu Changqing (above) said the company planned to further reduce sales of construction products to 5 per cent of its total revenue in the next two to three years and eventually only produce industrial products.