Xiwang Special Steel Announces 2015 Interim Results

HONG KONG, Aug. 19, 2015 /PRNewswire/ --

Interim Highlights

• Profit for the period increased by 4.0% to RMB211 million
• Net profit margin increased by 1.8ppts to 6.1%
• Focused on the production and sales of steel, the decline in sales was largely offset by lower sales cost driven by the decrease in the price of raw materials, leading to an increase in overall gross profit to 9.1%, representing an 1.0ppt increase as compared to the corresponding period of last year
• The overall sales volume of steel increased by 11.4% to 1.37 million tonnes
• Committed to the development of special steel products, and commenced special steel ingots production during the Period to meet the great market demand

Xiwang Special Steel Company Limited ("Xiwang Special Steel" or "the Group", HKEx: 1266), yesterday announced its 2015 interim results for the 6 months ended 30 June 2015 (the "Period"). During the Period, profit for the period of the Group was RMB211million (1H2014: RMB203 million), representing an increase of 4.0% as compared to the corresponding period of last year. Earnings per share were RMB10.6 cents. Net profit margin increased by 1.8ppts to 6.1%.

Business Review

During the first half of 2015, the steel industry was challenging. Due to the economic slowdown in China, though the sales of steel declined significantly, the prices of raw materials have also dropped significantly at the same time. During the Period, the revenue of the Group was RMB3.44 billion (1H2014: RMB4.70 billion), representing a decrease of 26.8% as compared to the corresponding period of last year. At the same time, cost of sales was RMB3.12 billion (1H2014:RMB4.32 billion), representing a decrease of 27.6% as compared to the corresponding period of last year. The decline was mainly due to the decrease in production costs of steel and the lower cost of sales driven by the significant decrease in the sales of trading commodities. As a result, the overall gross profit margin increased by 1 percentage point to 9.1% (1H2014: 8.1%) as compared to the corresponding period of last year.

During the Period, the total sales volume of steel was 1.37 million tonnes (1H2014: 1.23 million tonnes), representing an increase of 141.0 thousand tonnes or 11.4% as compared to the corresponding period of last year. As more long-processed production activities were employed during the Period, fewer raw materials with higher prices such as steel scraps and steel billets were purchased, the gross profit margin of steel increased by 0.4 percentage point to 9.9% (1H2014: 9.5%) as compared to the corresponding period of last year. During the Period, the cost of sales of steel decreased by 18.0% as compared to the corresponding period of last year to RMB2.71 billion (1H2014: RMB3.31 billion). The average sales cost per tonne decreased by RMB708 or 26.4% since the average sales cost per tonne decreased from RMB2,682 for the corresponding period of last year to RMB1,974 for the Period.

As the Group is dedicated to improve production efficiency and cost control as well as significantly decrease bank borrowings under the strong support of its parent company, Xiwang Group, the finance costs for the Period decreased by RMB43.5 million. During the period, profit for the period of the Group was RMB211 million (1H2014: RMB203 million), representing an increase of 4.0% as compared to the corresponding period of last year. The Group made a substantial capital investment in 2013 and 2014 for the long-processed production activities and the improvement of its production capacity, and the beneficial impact of which has started to be realized in 2014.

Production and Sales of Steel

During the Period, the Group produced and sold ordinary steel and special steel and mainly traded raw materials, such as iron ore dust and pellet. While ordinary steel mainly includes rebar and wire rod, special steel includes quality carbon structural steel, alloy structural steel, bearing steel and ingot. Ordinary steels produced by the Group can satisfy the demand of construction and infrastructure industry, and its special steels also face great demand for its applications in automobile, shipbuilding, chemical and petrochemical, machinery and equipment sectors. During the Period, revenue of ordinary steel was approximately RMB1.94 billion, representing a decrease of 20.9% as compared to the corresponding period of last year. Revenue of special steel was RMB1.07 billion (1H2014: RMB1.19 billion), representing a decrease of 10.8% as compared to the corresponding period of last year. The decline was mainly due to the decrease in selling price of steel.

In respect of the geographical distribution of sales of steel, Shandong province remains the No. 1 market of the Group. During the Period, the Group actively explored markets in surrounding regions and other provinces of China. The sales revenue of Jiangsu province was RMB490 million, representing a massive increase of 69.7% as compared to the corresponding period of last year, mainly contributed by higher demand and higher price in that region.

Mr. WANG Hui, Executive Director and Chief Executive Officer of Xiwang Special Steel, concluded, "We are committed to developing special steel products in order to meet the market demand. In light of the challenges in future, we will continue to spare no effort to upgrade product quality and focus on the development of special steel products for the sake of better performance and results, and maximize the rewards for our shareholders."

About Xiwang Special Steel Company Limited (stock code: 01266.HK)

Xiwang Special Steel, the only special steel enterprise with mass production capability of bearing steel bar and wire rods products in Shandong Province, its products mainly include high-quality and sophisticated building materials including bearing steel, gear steel, engineering machinery steel, with an annual output capacity of 3.3 million tonnes of steel products and 3.0 million tonnes of rolling wires respectively. In December 2013, Xiwang Special Steel passed the site inspection by the Ministry of Industry and Information Technology, and has become one of the second-batch enterprises that fulfils the standard of Iron and Steel Industry. Founded in 2003, Xiwang Special Steel was listed on the Main Board of the Hong Kong Stock Exchange in February 2012. After 10 years of development, the company formed a high-quality special steel production and operation mode which mainly focused on the production of bearing steel, gear steel, steel cord, automotive steel and Engineering Machinery steel. Xiwang Special Steel gradually transformed into a high-end steel production enterprise, and strives to become a "sophisticated special steel enterprise in Shandong Province".

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