China Zhongwang : Announcement Of Unaudited Quarterly Financial Results and Operational Statistics For the Nine-Month Period Ended 30 September 2019

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(incorporated in the Cayman Islands with limited liability)

(Stock Code: 01333)

ANNOUNCEMENT OF UNAUDITED QUARTERLY

FINANCIAL RESULTS AND OPERATIONAL STATISTICS

FOR THE NINE-MONTH PERIOD ENDED 30 SEPTEMBER 2019

The Board (the ''Board'') of directors (the ''Directors'') of China Zhongwang Holdings Limited (the ''Company'', together with its subsidiaries, the ''Group'') hereby announces the unaudited major financial results and operational statistics of the Group for the nine- month period ended 30 September 2019 (the ''Period under Review''), together with the unaudited comparative figures for the corresponding period in 2018 as follows:

CONDENSED CONSOLIDATED STATEMENT OF INCOME

		Nine months ended
		30 September
		2019		2018
	Note	RMB'000	RMB'000
		(Unaudited)	(Unaudited)
Revenue	1	18,650,430		16,356,774
Cost of sales	2	(13,231,223)	(11,093,135)
Gross profit	3	5,419,207		5,263,639
Investment income	4	144,386		170,879
Other income	5	458,740		97,824
Selling and distribution costs	6	(335,814)	(229,156)
Administrative and other operating expenses	7	(2,022,923)	(1,547,877)
Share of profit of associates		91,240		122,585
Finance costs	8	(999,884)	(949,524)
Profit before taxation		2,754,952		2,928,370
Income tax		(534,998)	(419,650)
Profit for the period		2,219,954		2,508,720

Note: The condensed consolidated statement of income has been prepared in accordance with the accounting policies which conform to International Financial Reporting Standards.

• For identification purposes only

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The Group is a world-leading fabricated aluminium product developer and manufacturer. It is currently principally engaged in the production of high precision, large-section, high value-added industrial aluminium extruded products and aluminium flat-rolled products that are widely used in the ecological construction, transportation, machinery and equipment and electric power engineering sectors.

1. Revenue

During the Period under Review, the Group's total revenue increased by 14.0% from approximately RMB16.36 billion in the corresponding period of 2018 to approximately RMB18.65 billion, of which approximately RMB18.64 billion (the corresponding period in 2018: approximately RMB16.34 billion) was generated from sales of the aluminium extrusion business, aluminium flat rolling business and further fabrication business. Other revenue comprised metal trade agency commission and amounted to approximately RMB14.01 million (the corresponding period in 2018: approximately RMB19.04 million).

The following sets forth the breakdown by business segments of the Group's revenue, sales volume and average selling price for the Period under Review and the corresponding period in 2018:

					Nine months ended 30 September
					2019					2018				Change
							Average
							selling					Average			Average
			Revenue	Sales volume	price	Revenue	Sales volume	selling price	Revenue	Sales volume	selling price
			RMB'000	tonnes	RMB/tonne	RMB'000	tonnes	RMB/tonne	%	%	%
Aluminium extrusion	business	12,856,886		398,812		32,238	13,045,933	393,708		33,136	-1.4%	1.3%	-2.7%
Aluminium alloy	formwork segment	7,443,538		188,219		N/A	8,917,299	235,728		N/A	-16.5%	-20.2%	N/A
- Sales of aluminium alloy formwork	7,134,267		188,219		37,904	8,917,299	235,728		37,829	-20.0%	-20.2%	0.2%
- Leasing of aluminium alloy formwork	309,271		N/A	N/A	-	N/A	N/A	N/A	N/A	N/A
Industrial aluminium extrusion segment	5,403,455		210,043		25,725	4,116,569	157,315		26,168	31.3%	33.5%	-1.7%
Construction	aluminium extrusion segment	9,893		550		17,987	12,065	665		18,143	-18.0%	-17.3%	-0.9%
Aluminium flat	rolling business	5,058,441		331,761		15,247	2,460,498	147,992		16,626	105.6%	124.2%	-8.3%
Further fabrication business	721,098		28,580		25,231	831,305	31,121		26,712	-13.3%	-8.2%	-5.5%
Others			14,005		N/A		N/A	19,038	N/A	N/A	-26.4%	N/A	N/A
Total			18,650,430		759,153		24,567	16,356,774	572,821		28,555	14.0%	32.5%	-14.0%

The Group has been continuously improving the production efficiency of its aluminium alloy formwork products, and is also actively exploring the feasibility of various business models. During the Period under Review, the Group began to pilot the aluminium alloy formwork leasing business model. During the Period under Review, sales volume of the Group's aluminium alloy formwork amounted to 188,219 tonnes and sales amount was approximately RMB7.13 billion. The volume of leasing of aluminum alloy formwork was 58,080 tonnes and the revenue from leasing of aluminum alloy formwork was approximately RMB310 million. Revenue and profits contributed from the leasing of aluminium alloy formwork business are evenly recorded throughout the leasing period across years while the sales of aluminium alloy formwork business recorded the revenue and profits instantly at the time when the transaction incurred. In the short run, revenue recognition and profits contribution from leasing is less than the

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sales of aluminium alloy formwork business. However, the leasing of aluminium alloy formwork business generates a bigger size of revenue and establishes recurring profit in the long run as it generates higher gross profit margin.

During the Period under Review, sales amount of the Group's industrial aluminium extrusion segment increased by 31.3% to approximately RMB5.40 billion from approximately RMB4.12 billion for the corresponding period in 2018, sales volume increased by 33.5% to 210,043 tonnes from 157,315 tonnes for the corresponding period in 2018, and average selling price was RMB25,725 per tonne (the corresponding period in 2018: RMB26,168 per tonne).

During the Period under Review, sales amount of the Group's aluminium flat rolling business substantially increased by 105.6% to approximately RMB5.06 billion from approximately RMB2.46 billion for the corresponding period in 2018, sales volume substantially increased by 124.2% to 331,761 tonnes from 147,992 tonnes for the corresponding period in 2018, and average selling price was RMB15,247 per tonne (the corresponding period in 2018: RMB16,626 per tonne).

For the Period under Review, revenue of the Group's further fabrication business was approximately RMB720 million (the corresponding period in 2018: approximately RMB830 million) with sales volume of 28,580 tonnes (the corresponding period in 2018: 31,121 tonnes) and average selling price of RMB25,231 per tonne (the corresponding period in 2018: RMB26,712 per tonne).

For the Period under Review, the Group's revenue from overseas sales amounted to approximately RMB1.99 billion (the corresponding period in 2018: approximately RMB1.90 billion), accounting for 10.7% of the Group's total revenue (the corresponding period in 2018: 11.6%).

1. Cost of Sales
   For the Period under Review, the Group's cost of sales increased by 19.3% to approximately RMB13.23 billion as compared to approximately RMB11.09 billion for the corresponding period in 2018, and the unit cost of products decreased by 10.0% to RMB17,429 per tonne from RMB19,366 per tonne for the corresponding period in 2018. Such decrease was due to the increase in production of aluminium extrusion business and aluminium flat rolling business of the Group, which led to the decrease in unit cost as a result.
2. Gross Profit and Gross Margin
   The Group's gross profit amounted to approximately RMB5.42 billion for the Period under Review, representing an increase of 3.0% from approximately RMB5.26 billion for the corresponding period in 2018. The overall gross margin of the Group decreased to 29.1% for the Period under Review from 32.2% for the corresponding period in 2018. This was mainly due to an increase in the proportion of aluminium flat rolling business with lower gross margin during the Period under Review, which led to the decrease in the overall gross margin.

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1. Investment Income
   Investment income of the Group, which mainly consists of interest income from bank deposits and interest income from available-for-sale financial assets, decreased to approximately RMB140 million for the Period under Review from approximately RMB170 million for the corresponding period in 2018.
2. Other Income
   Other income of the Group increased to approximately RMB460 million for the Period under Review from approximately RMB97.82 million for the corresponding period in 2018, mainly due to the increase in net gains on sales of machinery and equipment for the Period under Review as compared to the corresponding period in 2018; the shift from an exchange loss for the corresponding period in 2018 to an exchange gain for the Period under Review arising from the less appreciation of Renminbi in the Period under Review as compared to the corresponding period in 2018; and the increase in government subsidies for the Period under Review as compared to the corresponding period in 2018.
3. Selling and Distribution Costs
   Selling and distribution costs of the Group increased to approximately RMB340 million for the Period under Review from approximately RMB230 million for the corresponding period in 2018, primarily due to an increase in transportation and packaging costs as a result of the increase in sales volume of the Group for the Period under Review.
4. Administrative and Other Operating Expenses
   Administrative and other operating expenses of the Group for the Period under Review increased to approximately RMB2.02 billion from approximately RMB1.55 billion in the corresponding period of 2018. Such increase was primarily attributable to increase in research and development expenses as compared to the corresponding period in 2018 as a result of increase in investment in research and development by the Group for the Period under Review.
5. Finance Costs
   The Group's finance costs increased to approximately RMB1.0 billion for the Period under Review from approximately RMB950 million for the corresponding period in 2018. Such increase was principally due to an increase in the Group's average interest rate of borrowings for the Period under Review as compared to the corresponding period in 2018.

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CAUTION STATEMENT

The Board wishes to remind investors that the above unaudited quarterly financial results and operational statistics for the Period under Review and the corresponding period in 2018 are based on the Group's internal information. Investors should note that undue reliance on or use of such information may cause investment risks. Shareholders and investors are advised to exercise caution when dealing in the securities of the Company.

By order of the Board

China Zhongwang Holdings Limited

Lu Changqing

Chairman

Hong Kong, 31 October 2019

As at the date of this announcement, the Board consists of:

Executive Directors

Mr. Lu Changqing and Ms. Ma Qingmei

Non-executive Directors

Mr. Chen Yan, Mr. Lin Jun and Mr. Wei Qiang

Independent Non-executive Directors

Mr. Wong Chun Wa, Mr. Wen Xianjun, Mr. Shi Ketong and Mr. Lo Wa Kei, Roy

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