FOR IMMEDIATE RELEASE
(Hong Kong, 13 July 2004) Shui On Construction And Materials Limited ("SOCAM", stock code: 983) announced today that for the year ended 31 March 2004, its turnover rose by 55% to HK$3,590.9 million (2002 / 2003: HK$ 2,311.3 million). The profit attributable to shareholders was HK$147.7 million (2002 / 2003: a loss of HK$44.3 million), representing a profit per share of HK$0.55 (2002 / 2003: a loss per share of HK$0.17). The Directors recommend the payment of a final dividend of HK$0.275 per share.
According to SOCAM Chairman Mr Vincent H.S. Lo, the successful sale in October 2003 of more than 800 residential units in Rui Hong Xin Cheng (also known as Rainbow City), a large-scale housing project in Shanghai, yielded a substantial profit contribution to the Group. SOCAM's expanded cement production capacity in Chongqing and Guizhou also enabled it to maintain the same level of profit as the previous year despite rising production costs.
Although Hong Kong's economy showed signs of a recovery during the year, it was at too early a stage to benefit local construction and materials businesses. The decline in government contracts available for tender continued to affect the workload for SOCAM's construction division. The sales and gross margins of its construction materials operations in Hong Kong and the Pearl River Delta continued to be severely affected by the depressed construction market. On the other hand, the two venture capital funds in which SOCAM owns majority interests - namely The Yangtze Ventures Limited and The Yangtze Ventures II Limited - have begun to bear fruit and are expected to bring sizeable returns to the Group.
Cement operations in Central and Western China continue to grow
Cement production in Central and Western China will continue to be an important area of growth for SOCAM. In 2003, SOCAM signed joint venture agreements with two cement plants in Bijie and Changda in Guizhou, increasing the company's annual production capacity in the province by 600,000 tonnes. In Chongqing, its joint venture TH Cement is upgrading the existing cement plants as well as building two modern dry kilns in Diwei and Hechuan. At Diwei Cement, the new dry kiln of 1 million tonnes per annum, when completed, will take the plant's total annual capacity to 3.5 million tonnes.
With the construction of new kilns, SOCAM's annual capacities in Chongqing and Guizhou should reach 9 million tonnes and 2.5 million tonnes respectively by the end of the 2004/2005 financial year.
In mid June 2004, SOCAM entered into a framework agreement with the Yunnan authorities to form a joint venture and acquire 80% interest in Kunming Cement and Kaiyuan Cement, two of the biggest cement operators in Yunnan, a major province in the southwestern region of China. The combined production capacity of the joint venture will reach 4.5 million tonnes per annum when two new dry rotary kilns commence production by year-end. This investment, together with the expansion in Chongqing and Guizhou, will increase SOCAM's cement production capacity in southwestern China to 16 million tonnes per annum by March 2005.
Property development in the Chinese Mainland
With the independent shareholders' unanimous approval on 15 April 2004 to inject Rui Hong Xin Cheng development and US$50 million cash into Shui On Land Limited (SOL) - the newly established flagship property company of Shui On Group (SOCAM's privately held parent company) - SOCAM now enjoys greater opportunities in the dynamic property market in the Chinese Mainland. In addition to being able to equity-account for SOL's expected stable and strong earnings, SOCAM is also well positioned to co-invest with SOL in selected property developments that can capitalize on SOCAM's extensive construction expertise.
Although the Central Government has announced policies to cool down activities in industries in which SOCAM is actively engaged, the impact on its business should be short-term, according to Mr Lo. "This is mainly because SOCAM has always maintained a prudent financial policy and a high degree of liquidity, and our long-established relationships with Hong Kong and international banks ensure readily available funding sources for our Mainland projects," explained Mr Lo. "In fact, the Central Government's initiatives to curb overinvestment in these sectors may prove beneficial to well established companies like SOCAM since they should help to eliminate inefficient and speculative players in the market, prevent rampant fluctuation in prices and ensure healthy, long-term development of the targeted industries as well as the economy as a whole."
New Appointments
SOCAM also announced today a number of new appointments.
Mr Marvin Cheung Kin Tung Appointed Independent Non-executive Director
Mr Marvin Cheung Kin Tung has been appointed to be an Independent Non-executive Director of SOCAM. He joined KPMG Hong Kong in 1969 and was admitted into the partnership in 1974. He was elected the Chairman and Chief Executive Officer of KPMG Hong Kong on 1 October 1996 and retired on 31 March 2003. Mr Cheung is Chairman of the Listing Committee of the Main Board and GEM of the Stock Exchange of Hong Kong Limited. He was formerly President of the Hong Kong Society of Accountants, and is now a Board Member of the Airport Authority, a non-executive director of Hang Seng Bank Limited, Vice-Chairman of the Council of Hong Kong University of Science and Technology and a Council Member of the Open University of Hong Kong. He is a Fellow of the Institute of Chartered Accountants in England and Wales and the Hong Kong Society of Accountants.
Mr Frankie Wong Appointed Chief Executive Officer
Mr Frankie Wong, formerly SOCAM's Vice-chairman since 1997, is now appointed Chief Executive Officer of the company. He joined the Shui On Group in 1981 and has been Managing Director of Shui On Holdings Limited since 1991. Prior to joining the Shui On Group, he had many years of banking experience with several major international banks in Hong Kong. He graduated with a Bachelor of Science degree in Economics and a Master of Arts degree from the London School of Economics and Political Science and the University of Lancaster respectively.
Mr Lawrence Choi Appointed Vice Chairman
Mr Lawrence Choi, formerly Managing Director of SOCAM, is now appointed Vice-chairman of the company. He joined the Shui On Group in 1973 and has been an Executive Director of the Shui On Group since 1990. He was appointed Managing Director of the Shui On Group's construction division in 1991 and also that of the construction materials division in 1995. He is a member of the Standing Committee of the Ninth Guizhou Provincial Committee of the Chinese People's Political Consultative Conference. He holds a Bachelor of Science degree in Engineering from the University of California, Berkeley.
Shui On Construction & Materials Ltd (SOCAM), a member of the Shui On Group, was listed on the Stock Exchange of Hong Kong in 1997 (HKSE 0983). SOCAM's businesses include property development, cement, construction, construction materials and global materials trading. SOCAM also has an interest of more than 20% in Shui On Land Limited, the flagship property company of the Shui On Group.
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