Hong Kong, 28 June 2004 - Shui On Construction and Materials Limited ("SOCAM", HKSE: 983) announced today that its wholly-owned subsidiary, Prime Allied Enterprises Limited, entered into a framework agreement with Yunnan National Assets Operation Co. Ltd. ("YNAOL") on 18 June 2004 to form a joint venture to invest in Kunming Cement and Kaiyuan Cement in Yunnan province in Southwestern China. Registered capital of the joint venture will be Rmb 1 billion. Prime Allied will have an 80% interest in the joint venture and YNAOL will take up the remaining 20%.
In addition, SOCAM announced that it has entered into an agreement with Lafarge, the world's largest cement producer with global consolidated sales of approximately 110 million tonnes in 2003, whereby Lafarge has the exclusive option to purchase from SOCAM 50% of its interest in the joint venture at a small premium within nine months after the signing of the aforementioned framework agreement. The agreement also provides that Lafarge shall give technical assistance to SOCAM for completing and starting the new kilns in the acquired plants. If Lafarge exercises this option, SOCAM and Lafarge will each hold 40% of the cement joint venture in Yunnan.
Kunming Cement and Kaiyuan Cement are the two largest cement plants in Yunnan, with a combined production capacity of around 2.2 million tonnes per annum ("tpa"). A modern dry rotary kiln is currently under construction in the Dongjun site of Kunming Cement. This, together with the newly completed modern dry rotary kiln in Kaiyuan Cement, will add a further 2.3 million tpa to the total production capacity of these two cement plants.
"The investment in these two cement plants not only enables SOCAM to tap the vast business opportunities in Yunnan, a major province in the southwestern region of China, but also represents an important strategic move of the company," said Mr Vincent H. S. Lo, Chairman of SOCAM. "We are already the largest cement producer in Chongqing and Guizhou. The acquisitions in Yunnan will further strengthen our leading position in southwestern China and also allow us to actively participate in the modernization and restructuring of the cement industry in the Mainland. It is our intention to make further acquisitions in the province in the future."
Mr Lo added that the possible participation of Lafarge in this joint venture could mark the beginning of a long-term relationship as both companies continued to expand their cement business in the Chinese Mainland.
With the acquisition of the cement plants in Yunnan, SOCAM together with its joint venture partners will have a total production capacity in excess of 15 million tpa of high grade cement in the central and western regions by end of this year.
Demand for cement is expected to remain strong in Yunnan as the province is of strategic importance in the central government's Go West policy to boost economic development in the interior regions. One of the initiatives under the Go West policy is to develop the vast energy resources in the inland regions and transfer the electricity produced to affluent coastal cities. With huge reserves of coal and an extensive river system, Yunnan is embarking on numerous thermal and hydroelectric power generation projects.
Moreover, the central government's strategy to foster a much closer link with the Asean countries will further boost economic development in Yunnan, which is adjacent to Thailand, Myanmar (formerly Burma) and Laos and is close to other Asean countries.
NOTES TO EDITORS
About Shui On Construction & Materials Ltd
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.
About Lafarge
Lafarge, the world leader in building materials, holds top-ranking positions in all four of its Divisions: Cement, Aggregates & Concrete, Roofing and Gypsum. Lafarge employs 75,000 people in 75 countries and posted sales of €13.7 billion in 2003.With 2,700 employees in China, the group now operates in all its business segments and has 13 industrial facilities, including four cement plants with capacity totalling 3.8 million tonnes prior to its Chongqing extension. Additional information is available at www.lafarge.com.
The full text of this release can be accessed through the Internet at the following websites:
For further information, please contact:
Ms Ronny Pang / Ms Olivia Chow
Shui On Construction And Materials Limited
Tel: (852) 2879 1866
Pager: (852) 7108 9788
Fax: (852) 2787 4211
Email: corpcomm@shuion.com.hk