For immediate release

(Hong Kong, 10 November 1998) Shui On Construction and Materials Limited ("SOCAM" or "The Group") achieved strong profit growth for the six months ended 30 September 1998. Profit attributable to shareholders was HK$182.6 million, an increase of 25.4% over the same period in 1997 even though turnover decreased by 16.8% to HK$2,042 million. Earnings per share were HK$0.70. An interim dividend of HK$0.40 per share will be paid to shareholders.

According to Mr Vincent H. S. Lo, Chairman of SOCAM, the Construction Division recorded significant profit growth in spite of a decrease in turnover. "After completing nine contracts in the previous financial year, we are currently working on 21 projects. Since a relatively large number of these projects are at their initial stages of works, they normally would not generate a high volume of works. The result is that a smaller amount of contract values was certified during the period. This largely accounts for the Construction Division's lower turnover for the past six months. However, the improved margins of existing contracts and effective cost control continued to enhance the overall profitability of the Division."

In July 1998, the Division was awarded the contract for the development of a home ownership project in Tseung Kwan O under the Private Sector Participation Scheme. The development of this project is expected to be completed in the first quarter of 2001 and should provide the Group with a steady profit stream in the next few financial years.

The Construction Division's gross and outstanding values of contracts on hand at 30 September 1998 were approximately HK$12.0 billion and HK$8.6 billion respectively, significantly higher than the HK$10.1 billion and HK$6.7 billion a year ago.

Performance of the Construction Materials Division is expected to remain steady in the near future. The increased number of Housing Authority projects has kept the production of Ken On Concrete at high level even though building activities in the private sector have slowed down under the current economic environment.

The cement joint venture in Chongqing continued to grow in both turnover and profit as the new 300,000-tonne rotary kiln has come into full operation. Production and sales of the Nanjing cement plant, which Shui On took over in March 1998, are now at normal levels.

Looking ahead, the Construction Division is in a good position to achieve higher turnover and profit in ensuing years in view of its high volume of outstanding work on hand and the large number of projects available for tender in the coming months from the Housing Authority, the Architectural Services Department, the KCRC's West Rail projects and MTRC's Junk Bay extension.

This level of construction activity should also ensure a steady demand for concrete, cement and quarry products of the Construction Materials Division.

Moreover, the acceleration in massive infrastructure projects as well as rebuilding works following the flooding in the Chinese mainland are expected to raise demand for high grade cement which would benefit the Group's cement operations in Chongqing and Nanjing.

SOCAM should, barring unforeseen circumstances, achieve continued strong profit growth in the second half of the current financial year.