KINGBOARD LAMINATES HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock Code: 1888)

Transcription

1 KINGBOARD LAMINATES HOLDINGS LIMITED (Incorporated in the Cayman Islands with limited liability) (Stock Code: 1888) ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2006 FINANCIAL HIGHLIGHTS Revenue surged 38% to exceed HK$8.4 billion Pre-tax profit margin increased to 22% Profit attributable to equity holders of the Company grew by 52% to HK$1,638.1 million Return on equity attributable to equity holders of the Company advanced to 34.9% Healthy financial position with net gearing at 24% The directors ( Directors ) of Kingboard Laminates Holdings Limited (the Company ) have pleasure in announcing the audited consolidated results of the Company and its subsidiaries (collectively referred to as the Group ) for the year ended 31 December 2006 together with the comparative figures for the year ended 31 December 2005 as follows: 1

2 Consolidated Income Statement For the financial year ended 31 December 2006 Notes Revenue 3 8,472,422 6,131,169 Cost of sales (6,058,390) (4,397,453) Gross profit 2,414,032 1,733,716 Other income 4 77,508 75,036 Distribution costs (155,890) (120,804) Administrative costs (376,062) (353,761) Finance costs 5 (73,064) (100,343) Share of results of an associate (762) (744) Discount on acquisition of additional interest in a subsidiary 1,498 Profit before taxation 1,887,260 1,233,100 Income tax expense 7 (145,849) (91,030) Profit for the year 1,741,411 1,142,070 Attributable to: Equity holders of the Company 1,638,134 1,078,235 Minority interests 103,277 63,835 1,741,411 1,142,070 Dividends 8 2,277, ,809 Earnings per share 9 Basic HK$0.573 HK$

3 Consolidated Balance Sheet At 31 December 2006 Notes Non-current assets Investment properties 40,220 33,057 Properties, plant and equipment 4,065,323 3,962,090 Prepaid lease payments 171, ,939 Available-for-sale investments 9, ,140 Non-current deposits 15,166 39,440 Interests in an associate 19,847 4,301,670 4,330,513 Current assets Inventories 1,339, ,785 Trade and other receivables and prepayments 10 2,710,257 2,372,546 Prepaid lease payments 4,015 3,885 Amounts due from fellow subsidiaries 173,181 4,947,142 Derivative financial instruments 3,704 12,813 Taxation recoverable Bank balances and cash 1,713, ,020 5,944,210 8,911,457 Current liabilities Trade and other payables , ,505 Bills payable , ,735 Amounts due to ultimate holding company 3,946,158 Amounts due to immediate holding company 75,548 Amounts due to fellow subsidiaries 4,881 1,663,082 Derivative financial instruments 195 Taxation payable 245, ,337 Bank borrowings amount due within one year 540,687 1,008,767 2,071,233 7,820,132 Net current assets 3,872,977 1,091,325 Total assets less current liabilities 8,174,647 5,421,838 Non-current liabilities Deferred tax liabilities ,702 Bank borrowings amount due after one year 2,535, ,915 2,535, ,617 5,639,104 5,048,221 3

4 Capital and reserves Share capital/paid-in capital 300,000 1,112,498 Reserves 4,638,168 3,335,378 Equity attributable to equity holders of the Company 4,938,168 4,447,876 Minority interests 700, ,345 Total equity 5,639,104 5,048,221 Notes: 1. GROUP REORGANISATION AND BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENT The Company was incorporated and registered as an exempt company with limited liability in the Cayman Islands on 10 May 2006, and its shares were listed on the main board of The Stock Exchange of Hong Kong Limited (the Stock Exchange ) with effect from 7 December Its ultimate holding company is Kingboard Chemical Holdings Limited ( KCHL ), which is an exempt company with limited liability incorporated in the Cayman Islands with its shares listed on the main board of the Stock Exchange. Through a group reorganisation to rationalise the structure of the Group in preparation for the listing of the Company s shares on the Stock Exchange (the Group Reorganisation ), the Company became the holding company of the companies comprising the Group. Details of the Group Reorganisation are more fully explained in the paragraph headed Corporate Reorganization in Appendix VI to the prospectus of the Company dated 24 November 2006 (the Prospectus ). The Group resulting from the Group Reorganisation is regarded as a continuing entity. Accordingly, the consolidated financial statements of the Group for the year ended 31 December 2006 have been prepared using the principles of merger accounting in accordance with Accounting Guideline 5 Merger Accounting for Common Control Combinations as if the group structure under the Group Reorganisation had been in existence throughout the two years ended 31 December 2006 or since their respective dates of incorporation, whichever is the shorter period. 2. APPLICATION OF NEW AND REVISED HONG KONG FINANCIAL REPORTING STANDARDS ( HKFRSs ) NOT YET EFFECTIVE The Group has not early applied the following new standards, amendment or interpretations that have been issued but are not yet effective. The Directors anticipate that the application of these standards, amendment or interpretations will have no material impact on the results and the financial position of the Group. HKAS 1 (Amendment) Capital disclosures 1 HKFRS 7 Financial instruments: Disclosures 1 HKFRS 8 Operating segments 8 HK(IFRIC) INT 7 Applying the restatement approach under HKAS 29 Financial Reporting in Hyperinflationary Economies 2 HK(IFRIC) INT 8 Scope of HKFRS 2 3 HK(IFRIC) INT 9 Reassessment of embedded derivatives 4 HK(IFRIC) INT 10 Interim financial reporting and impairment 5 HK(IFRIC) INT 11 HKFRS 2 Group and treasury share transactions 6 HK(IFRIC) INT 12 Service concession arrangements 7 1 Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 March Effective for annual periods beginning on or after 1 May Effective for annual periods beginning on or after 1 June Effective for annual periods beginning on or after 1 November Effective for annual periods beginning on or after 1 March Effective for annual periods beginning on or after 1 January Effective for annual periods beginning on or after 1 January

5 3. BUSINESS AND GEOGRAPHICAL SEGMENTS Business segments No business segment analysis is shown as more than 90% of the Group s principal activities of the business segment is sales of laminates and related products. Geographical segments The analysis of the Group s revenue by geographical market for each of the years is as follows: The People s Republic of China (the PRC ) 7,649,605 5,661,918 Other Asian countries 585, ,030 Europe 179,095 74,295 America 58,191 41, OTHER INCOME 8,472,422 6,131,169 Other income comprises: Dividends from available-for-sale investments 901 Net exchange gain 9,091 9,854 Gain on disposal of available-for-sale investments 4,162 Gain on fair value changes of investment properties 7, Gain on fair value changes of foreign currency forward contracts 23 Interest income from bank deposits 23,068 5,130 Interest income from fellow subsidiaries 5,084 Management fee income from fellow subsidiaries 22,610 33,292 Rental income 6,014 2,053 Others 8,638 14, FINANCE COSTS 77,508 75,036 Interest on bank borrowings wholly repayable within five years 74,926 50,449 Interest expense to holding company and fellow subsidiaries 45,701 52,923 Other finance charges 5,944 1, , ,875 Fair value changes of interest rate swap (50,463) (801) 76, ,074 Less: Interest capitalised (3,044) (3,731) 73, ,343 Borrowing costs capitalised during the year arose on the general borrowing pool and are calculated by applying a capitalisation rate of 5% for 2006 (2005: 5%) to expenditures on qualifying assets. 6. DEPRECIATION During the year, depreciation of approximately HK$458.5 million (2005: HK$379.4 million) was charged in respect of the Group s properties, plant and equipment. 5

6 7. INCOME TAX EXPENSE The amount comprises: Hong Kong Profits Tax Charge for the year 3,472 48,599 (Over)underprovision in previous years (9,461) 5,862 (5,989) 54,461 Taxation arising in other jurisdictions Charge for the year 159,781 48,628 Underprovision in previous years 4,216 1, ,997 49,908 Deferred taxation Credit for the year (12,159) (13,339) 145,849 91,030 Hong Kong Profits Tax is calculated at 17.5% on the estimated assessable profits for the year. Taxation arising in other jurisdictions is calculated at the rates prevailing in the relevant jurisdictions. 8. DIVIDENDS The following dividends were paid by certain subsidiaries to KCHL and its subsidiaries and the minority shareholders prior to the Group Reorganisation. Dividends paid to: KCHL and its subsidiaries 2,257, ,918 Minority shareholders of subsidiaries 19,385 13,891 2,277, ,809 Interim dividends paid in respect of current year 35, ,393 Special dividend paid in respect of current year 2,000,000 Final dividends paid in respect of previous year 241, ,416 2,277, , EARNINGS PER SHARE The calculation of the basic earnings per share attributable to the ordinary equity holders of the Company is based on the following data: Earnings for the purpose of calculating basic earnings per share 1,638,134 1,078,235 Number of shares Weighted average number of ordinary shares for the purpose of calculating basic earnings per share 2,859,863 2,730,926 No diluted earnings per share has been presented as the Company does not have any dilutive potential ordinary shares. 6

7 10. TRADE AND OTHER RECEIVABLES AND PREPAYMENTS Trade receivables 2,147,557 1,840,890 Bills receivables 322, ,858 Other receivables and prepayments 240, ,798 2,710,257 2,372,546 The Group allows credit periods of up to 120 days, depending on the products sold, to its trade customers. The following is an aged analysis of trade receivables at the balance sheet date: 0-90 days 1,681,537 1,269, days 463, ,812 Over 180 days 2,844 58,117 All bills receivables are aged within 90 days at the balance sheet date. 2,147,557 1,840,890 The fair values of the Group s trade and other receivables and bills receivables at the balance sheet date approximate their corresponding carrying amounts. 11. TRADE AND OTHER PAYABLES AND BILLS PAYABLE The following is an aged analysis of trade payables at the respective balance sheet date days 327, , days 43,929 22,356 Over 180 days 21,448 34, , ,408 The fair values of the Group s trade and other payables and bills payable at the balance sheet date approximate their corresponding carrying amounts. BUSINESS REVIEW On behalf of the Board of Directors, I am pleased to present the first annual report of Kingboard Laminates Holdings Limited (the Company ) and its subsidiaries (the Group ) for the financial year ended 31 December 2006 since our successful listing on the main board of The Stock Exchange of Hong Kong Limited (the Stock Exchange ) on 7 December The overwhelming market response to our initial public offering reflected market confidence in the solid business fundamentals of the Group. The success of the initial public offering laid a new milestone and granted the Group an access to the international capital markets so that we now have the financial agility to capture additional growth opportunities as they arise. FINANCIAL HIGHLIGHTS Revenue surged 38% to exceed HK$8.4 billion Pre-tax profit margin increased to 22% Profit attributable to equity holders of the Company grew by 52% to HK$1,638.1 million Return on equity attributable to equity holders of the Company advanced to 34.9% Healthy financial position with net gearing at 24% 7

8 PERFORMANCE On the back of positive market conditions especially at the emerging markets in 2006, demand for consumer electronics product remained robust. Being the largest laminate producer in the world, the Group was able to take full advantage of our vertically integrated business model with a competitive cost structure to continuously gain share in the global laminate market. Our comprehensive product portfolio enabled us to further broaden our customer base and enter new markets. Sales of paper laminate, glass epoxy laminate and composite epoxy material (CEM) laminate each continued to attain respectable growth in the year. Consolidated revenue of the Group was up 38% from fiscal year 2005 to HK$8,472.4 million. Earnings before interest and tax ( EBIT ) rose even higher by 47% to HK$1,960.3 million over previous year. Volume sales were up by around 14% with the average monthly shipment reaching 6.7 million sq. meters. Revenue growth had outpaced volume growth because of tight supply of upstream raw materials which resulted in higher average selling price of laminate. Coupled with better cost structure, the capacity expansion of our manufacturing facilities in Fogang, Guangdong province had contributed positively to the EBIT margin expansion. In addition, other upstream component materials businesses such as copper foil, glass yarn and glass fabric had provided a strong foundation to this sterling earning growth as the Group benefited from the stable supply of quality raw material at competitive costs along the vertically integrated supply chain. The increase in distribution costs by 29% was in line with the increased shipment volume of laminates and other upstream component materials. Compared to the magnitude of the revenue growth, administrative expenses increased by only 6.3% as a result of our tight control over costs. Our effective tax rate stood at 7.7%, being similar to last year. LIQUIDITY AND CAPITAL RESOURCES The financial position of the Group continued to be healthy. As at 31 December 2006, net current assets and current ratio of the Group were approximately HK$3,873.0 million (31 December 2005 HK$1,091.3 million) and 2.87 (31 December ) respectively. The net working capital cycle improved from 158 days as at 31 December 2005 to 124 days as at 31 December 2006 on the following key metrics: Inventories, in terms of stock turnover days, increased to 81 days (31 December days) Trade receivables including amounts due from fellow subsidiaries, in terms of debtors turnover days, improved to 100 days (31 December days) Trade and bills payables including amounts due to fellow subsidiaries, in terms of creditors turnover days, improved marginally to 57 days (31 December days) The Group s ratio of interest bearing borrowings net of cash to total equity ( net gearing ratio ) was 24% as at 31 December % of the total bank borrowings came from the draw-down of HK$2,535 million of a 5-year term loan and revolving loan facilities in December The proportion of bank borrowings between short term and long term bank borrowings stood at 18%: 82% (31 December 2005: 74%:26%). All bank borrowings were denominated in either Hong Kong or US dollars. Our recurrent operating cash inflow was strong and positive even after funding working capital requirement, capital expenditure and payment of interest and tax during the year. In 2006, the Group had invested HK$812.8 million in new production facilities in order to tap on the enormous business opportunities ahead in China and overseas markets. 8

9 The Group continued to adopt prudent financial management policy including the use of interest rate swap contract to minimize its exposure to fluctuation in interest rates movement. There is no material foreign exchange exposure to the Group during the year under review. The Group s revenue, mostly dominated in Hong Kong dollars, Renminbi and US dollars, was fairly matched with the currency requirements of operating expenses. USE OF NET PROCEEDS FROM THE COMPANY S INITIAL PUBLIC OFFERING The Company was successfully listed on the Stock Exchange on 7 December Net proceeds from the issuance of new shares amounted to approximately HK$1 billion and its proposed applications are set out as follows: Amount Unutilized Proposed utilized up to amount as at application 31 December 31 December amount HK$ 000 repayment of bank borrowings 281, ,000 0 for future capital expenditure 693,700 32, ,637 as general working capital 89,600 89,600 0 Total 1,064, , ,637 The remaining unutilized net proceeds are placed as short term deposits with licensed banks in Hong Kong. HUMAN RESOURCES As at 31 December 2006, the Group had a workforce of over 7,200 (31 December 2005: 6,600). The increase in headcount was in line with our ongoing expansion blueprint. Other than offering competitive salary package, the Group grants discretionary bonuses to eligible employees based on our financial achievement and individual s performance. PROSPECTS Our remarkable operating performance has put the Group in an excellent position to invest in future earnings growth. The Group will continue to focus on our core strategies to expand market share while preserving competitive cost structure with our winning vertically integrated business model. After some brief softness in demand for laminates at the start of 2007 due to seasonal effect of Chinese Lunar New Year, our laminate order book has picked up since March 2007 and our plants are currently operating near full capacity. In anticipation of growing demand for more sophisticated electronics product, the Group will develop new products and continue to expand production capacity of glass epoxy laminate and upstream component materials so as to capture new business opportunities in the global market place. We aim to achieve our continuous sales growth by strengthening our relationship with brand name manufacturers and expanding our presence in overseas markets such as India and Russia. 9

10 The Group sets to expand the monthly production capacity of glass epoxy laminate by 35% in To capitalize on the cost advantages, the production facilities at Fogang, Guangdong province will expand further by 400,000 sheets monthly by end of The new glass epoxy laminate factory in Jiangyin, Jiangsu province will raise our monthly production capacity by another 600,000 sheets by end of This is in line with our strategy to enhance our market presence in eastern China where there is rapid growth in electronics industry. In addition, to support laminate capacity growth, the capacity expansion of upstream component materials including copper foil, glass yarn and glass fabric is planned in tandem in The new epoxy resin plant in Jiangyin, Jiangsu province will commence trial operation by April All this additional capacity will strengthen our cost competitiveness and enables us to capture market share in future. APPRECIATION Finally, on behalf of the board of Directors ( Board ), I would like to take this opportunity to express my sincere gratitude to our shareholders, customers, banks, the management and employees for their unreserved support to the Group. FINAL DIVIDEND As set out in the Prospectus, the Board did not plan to distribute a dividend to the Company s shareholders in respect of the Company s profit attributable to equity holders of the Company for the year ended 31 December In this regard, the Board does not recommend the payment of any final dividend in the year. Payment of future dividends will be based on the dividend policy of the Company as set out in the Prospectus. COMPLIANCE WITH THE CODE ON CORPORATE GOVERNANCE PRACTICES In the opinion of the Directors, the Company has complied with the code provisions of the Code on Corporate Governance Practices (the Code ) as set out in Appendix 14 to The Rules Governing the Listing of Securities on the Stock Exchange ( Listing Rules ) since the listing of the Company on 7 December 2006 up to and including 31 December 2006, save for the deviation that the Directors have not held at least four board meetings in the year as required under paragraph A.1.1 of the Code as the Company was listed on 7 December The Company will ensure that paragraph A.1.1 of the Code is complied with in the future. PURCHASE, SALE OR REDEMPTION OF SHARES During the year, there was no purchase, sale or redemption by the Company or any of its subsidiaries of the Company s listed securities on the Stock Exchange. AUDIT COMMITTEE The Audit Committee has reviewed with the management the accounting principles and practices adopted by the Group and discussed auditing, internal control and financial reporting matters including the review of the audited annual financial statements of the Group for the year ended 31 December REVIEW OF THE PRELIMINARY ANNOUNCEMENT BY AUDITORS The figures in respect of the preliminary announcement of the Group s consolidated balance sheet, consolidated income statement and the related notes thereto for the year ended 31 December 2006 have been agreed by the Group s auditors, Messrs. Deloitte Touche Tohmatsu, to the amounts set out in the Group s audited consolidated financial statements for the year. The work performed by Messrs. Deloitte Touche Tohmatsu in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing, Hong Kong Standards on Review Engagements or Hong Kong Standards on Assurance Engagements issued by the Hong Kong Institute of Certified Public Accountants and consequently no assurance has been expressed by Messrs. Deloitte Touche Tohmatsu on the preliminary announcement. 10

11 PUBLICATION OF FURTHER INFORMATION The annual report of the Company for the year ended 31 December 2006 containing all the information required by the Listing Rules will be dispatched to the Company s shareholders and published on the Stock Exchange s website in due course. ANNUAL GENERAL MEETING It is proposed that the Annual General Meeting of the Company will be held on 18 May The Notice of the Annual General Meeting will be published in the newspapers and sent to the shareholders of the Company in due course. Hong Kong, 28 March 2007 By Order of the Board Kingboard Laminates Holdings Limited CHEUNG Kwok Wa Chairman As at the date of this announcement, the Board consists of Messrs. Cheung Kwok Wa, Cheung Kwok Keung, Cheung Kwok Ping, Lam Ka Po, Cheung Ka Ho, Chan Sau Chi, Liu Min and Zhou Pei Feng, being the executive Directors, Mr. Lo Ka Leong, being the non-executive Director, and Messrs. Chan Charnwut Bernard, Chan Yue Kwong, Michael, Leung Tai Chiu and Mok Yiu Keung, Peter, being the independent non-executive Directors. Please also refer to the published version of this announcement in South China Morning Post. 11