FOR IMMEDIATE RELEASE
(Hong Kong, 21 July 2003) Shui On Construction And Materials Limited ("SOCAM", stock code: 983) today announced that for the year ended 31 March 2003, its turnover fell by 38% to HK$2,311.3 million (2001/2002: HK$3,757 million). The loss attributable to shareholders was HK$47.1 million (2001/2002 profit attributable to shareholders: HK$104 million), representing a loss per share of HK$0.18. The Directors did not recommend the payment of a final dividend.
According to SOCAM Chairman Mr Vincent H.S. Lo, the loss was mainly due to the severe downturn in the construction and materials markets in Hong Kong, including the drastic reduction in public housing works which had been a major revenue source for the Group, as well as the write down of its listed share and property portfolio. No more than ten tenders were available from the Hong Kong Housing Authority (HKHA) in the past year, of which fewer than half were subsequently awarded. However, since significant progress has been made in its cement and property development businesses in the Chinese Mainland, Mr Lo is confident that the Group will be able to achieve long-term sustainable growth and, barring unforeseen circumstances, should return to profitability in the coming financial year.
The construction of extensive road systems, power plants and other infrastructural projects in the central and western provinces on the Mainland under the "Go West" policy continues to boost the demand for high grade cement. With the accelerated acquisitions of cement operations in and around Chongqing as well as in Guizhou, SOCAM has built up a total production capacity of 7.5 million tonnes of high grade cement per annum, making it one of the top three producers in the Mainland. Expansion of existing operations alone, including the construction of new kilns and grinding mills, is expected to add another 3.5 million tonnes to the Group's annual production capacity within the next two years.
Leadership in Chongqing and Guizhou will facilitate fast expansion into nearby markets
TH Cement, SOCAM's joint venture in Chongqing, now controls three of the five largest cement plants in Chongqing and Sichuan Province. The Hechuan and Diwei plants in Chongqing command in aggregate more than 70% of the high grade cement market in and around the metropolis, and a one-million-tonne-per-annum dry kiln will be added in each of these operations over the next two years. The recent acquisitions of two medium size cement plants, each with annual capacity of 400,000 tonnes, have further strengthened the Group's coverage of the Chongqing market. TH Cement now has a combined annual capacity of 5.6 million tonnes.
In Guizhou, the new 400,000-tonne-per-annum dry kiln in Zunyi commenced production in December 2002 and has since attained nearly full production. With encouraging sales and upcoming infrastructural projects nearby, the Group is exploring the feasibility of adding more kilns of similar sizes in Zunyi. The 400,000-tonne-per-annum Dingxiao plant in Qianxinan was also commissioned in December 2002.
The Group is conducting active negotiations for new joint ventures in various parts of Guizhou with a view to building a comprehensive network encompassing all strategic locations in the province.
"Our strategy of acquiring state-owned plants and then upgrading their technology and adding new kilns has enabled us to quickly establish leadership in Chongqing and Guizhou. We are now actively studying the feasibility of entering the markets in nearby provinces where rapid development is also underway," added Mr Lo.
Shanghai Rui Hong Xin Cheng to launch pre-sale this year
As Shanghai continues to enjoy double-digit growth, residential property prices are expected to rise in line with growing demand in the foreseeable future. The accelerating development of Shanghai as an international financial centre and its successful bid for World Expo 2010 will further boost the already buoyant property market.
Mr Lo said, "SOCAM's Rui Hong Xin Cheng is already an established name for quality housing in Shanghai and should produce a significant and steady income stream for the Group in the coming years." On completion, the entire development project will encompass more than 11,000 residential units with a gross floor area of approximately 1.2 million square metres, as well as around 300,000 square metres of retail and commercial space.
A total of 816 units of the current phase, which is situated on top of a subway station due for opening in 2004/05, will be launched for pre-sale in the third quarter of this year. The superstructure of these seven blocks has been completed and fitting-out works are in progress. Construction of another four blocks commenced in April with completion scheduled by end of 2004. The remaining two blocks of this phase will be completed by June 2005. The experienced construction management team in charge of Rui Hong Xin Cheng has been able to substantially reduce the construction costs. At current selling prices, SOCAM expects the residential units to yield a reasonable margin.
In Hong Kong, SOCAM has expedited downsizing with a view to evolving into a lean and competitive organisation catering to a far smaller market but flexible enough to rapidly expand should a turnaround in the market materialise. Emphasis on tendering continues to be shifted to projects of the Architectural Services Department (ASD) and other institutional projects, which are more varied and often involve design and build capabilities. During the 2002/03 financial year, SOCAM won four ASD contracts although only one public housing construction contract was awarded to the Group due to contractors scrambling for a very limited portfolio of HKHA works. Four maintenance contracts were also won.
Shui On Construction and Materials Limited (SOCAM), a member of the Shui On Group, was listed on the Hong Kong Stock Exchange in 1997 and is engaged in construction, construction materials and property development in Hong Kong and the Chinese Mainland. Apart from SOCAM, the Shui On Group has a separate, non-listed property arm with investments in Shanghai, Hong Kong, Hangzhou, Beijing, Guangzhou and New York.
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Ronny Pang / Shelly Cheng
Tel: (852) 2879 1866
Pager: (852) 7108 9788
Fax: (852) 2787 4211
Email: corpcomm@shuion.com.hk