China Zhongwang Expands Industrial Aluminum Extrusion Business

Hong Kong Economic Journal article reported on 14 March that China Zhongwang (1333.HK), which expanded its industrial aluminum extrusion business in 2010, expects to raise the proportion of its mainland sales from 55% to more than 60%.

Lu Changqing, Executive Director and Vice President of China Zhongwang, said that the Group will focus on China, along with overseas markets, and plans to introduce more extrusion presses from 2010 to 2012 in order to meet the demand for high value-added large section aluminum extrusion products and increase the Group s share in the transport and power equipment markets.

China Zhongwang sets capital expenditure for this year at RMB1 billion to introduce more large extrusion presses. Lu believes welded processed products, which have a higher gross profit margin, will begin to contribute to the Group next year.

Commenting on U.S. s anti-dumping duties on aluminum extrusion exports from China, Lu said the U.S. is still in demand for the high value-added products. The gross profit margin of exports exceeds 50%, while that of domestic sales is only 33%. The Group has no plans to give up on its overseas business as the gross profit margin of domestic sales is not expected to climb in the near future. In addition, there is room for hike in processing fees due to growing demand. The overall processing fees are likely to remain at a level similar to last year.

The annual output capacity of China Zhongwang s industrial aluminum extrusions is expected to increase from 640,000 tons in 2010 to 1 million tons at the end of 2013 to 2014. The Group s dividend yield ratio stands high at 6%, Lu said, adding that the Group will focus more on cash flows, capital expenditure and investment returns, and hope to create better value for shareholders.