Tonghua Iron & Steel Group and Shougang Group Achieved Strategic Restructuring

July 16, the strategic cooperation framework agreement between the provincial government and Shougang Corporation and Shougang Holding Company cum the agreement on restructuring of Tonghua Iron & Steel Group between Shougang Corporation and Shougang Holding Company were officially signed. Provincial secretary Sun Zhengcai attended the signing ceremony, and Governor Wang Rulin made a speech at the ceremony.

The signing ceremony was chaired by Member of the Standing Committee of CPC Provincial Committee and Vice Governor Zhu Yanfeng, and Chairman of Shougang Corporation Zhu Jimin and Deputy Director of Beijing SASAC Wang Hao made speeches.

Wang Rulin pointed out that Jilin is an important industrial base, and Tonghua Iron & Steel Group as the largest provincial state-owned industrial enterprise in Jilin plays an important role in the province's industrial economy. Over the years, Tonghua Iron & Steel Group has actively pushed forward reform and constantly grown in strength, and has made important contributions to the economic and social development in Jilin. With China s steel industry policy adjustment, Tonghua Iron & Steel Group has to deepen the adjustment and reorganization. The provincial party committee and government in particular secretary Sun Zhengcai attach great importance to reorganization of Tonghua Iron & Steel Group, and have done a lot of work for that. Shougang Group is one of China's Fortune 500, with obvious technological advantage, complete marketing network and strong comprehensive strength, is focusing on creating a world-renowned and domestic-leading large iron and steel enterprise. Shougang s restructuring of Tonghua Iron & Steel Group is of great significance, which not only promotes the development of steel industry of Jilin, but also will certainly play a positive role in promoting development and growth of Shougang Group, and will also further expand exchanges and cooperation between Jilin and Beijing. After signing the strategic cooperation agreement with Tonghua Iron & Steel Group, Jilin Province will earnestly implement the agreement, and all the relevant departments and parties across the province should implement quality services in industry consolidation, project construction, resource allocation and so on, and should unswervingly give full support. Jilin Province is also very willing to take this opportunity with Beijing to further promote complementary advantages, expand cooperation areas, and strive to create a new situation of common development. Finally, Wang Rulin on behalf of the provincial party committee and government wished Shougang Group s successful restructuring of Tonghua Iron & Steel Group achieving fruitful results as soon as possible.
At the signing ceremony, Vice Governor Wang Jizu on behalf of the provincial government signed the "Strategic Cooperation Framework Agreement" with chairman of Shougang Corporation Zhu Jimin and president of Shougang Holdings Company Li Zhiqiang. The leaders of Shougang Corporation, Shougang Holding Company, Jilin SASAC, Jilin Province Jiantong Investment Corporation and Tonghua Iron & Steel Group signed the "Agreement on Restructuring of Tonghua Iron & Steel Group". Tonghua City and Shougang Holding Company signed the "Strategic Cooperation Framework Agreement".
In the principles of doing good to stable, sustained and healthy development of Tonghua Iron & Steel Group, doing good to product structure adjustment and technical upgrading, doing good to safeguarding and protecting the legitimate rights and interests of staff, law compliance, mutual respect, mutual benefit, openness and transparency, the two sides have conducted repeated consultations for this reorganization, and have determined that Shougang contributes 2.5 billion yuan in cash to purchase some of the shares Jilin SASAC holds in Tonghua Iron & Steel Group and increases capital to Tonghua Iron & Steel Group. Meanwhile, Jilin SASAC also transfers some of the shares in Tonghua Iron & Steel Group to Shougang Corporation. When the reorganization is completed, Shougang Corporation and Shougang Holdings Company will hold 77.59% shares in Tonghua Iron & Steel Group, and China Huarong Asset Management Corporation will hold 10.33%, the provincial SASAC will hold 10%, and other minority shareholders will hold 2.08%.

After reorganizing Tonghua Iron & Steel Group, Shougang will include the development plan of Shougang into the "Twelfth Five-year" plan of Shougang, will include the production management, project construction and other issues of Tonghua Iron & Steel Group into the steel main process management system of Shougang, implement technical transformation and upgrading, product structure adjustment, industrial chain extension, diversified operations and other measures, and strive to achieve the goal that by the end of "Twelfth Five-year" period, sales revenue of Tonghua Iron & Steel Group could be doubled, and its per capita sales revenue, cost of sales, return on assets, return on equity and other indicators could reach the average level of Shougang. In the future development, Shougang will regard Tonghua Iron & Steel Group as its major steel company, play the bridgehead role in implementing product R & D, sales and marketing in Northeast region, and make greater contributions to achieving take-off of Shougang and speeding up revitalization of old industrial base in Jilin.
Shougang is a key steel enterprise of China, but also one of the large enterprises with early implementation of the diversification strategy, so its production scale, product structure, innovation ability and management level reach the advanced level among the domestic industry. In recent years, Shougang has followed the planning of the central authorities, earnestly implemented the scientific development concept, seized the great opportunity of production adjustment, accelerated product structural adjustment, vigorously promoted innovation, further enlarged the primary iron and steel industry through mergers and restructuring, and strived to build into a world-renowned and domestic-leading large steel company.

Tonghua Iron & Steel Group is the largest steel company in our province, but also an iron and steel enterprise China focuses on supporting in revitalizing the northeast old industrial base, and it has a certain scale, resource and product advantage in the northeast region. To meet China s steel industry policy and the company s requirements for constant deepening of reform, Tonghua Iron & Steel Group is in urgent needs to introduce strategic investors, join in a large steel group, and make use of the capital, technology and management advantages of strategic investors, to achieve its rapid, healthy and continuous development.

The strategic reorganization between Shougang Group and Tonghua Iron & Steel Group is in line with the overall plan and requirement of "National steel industry restructuring and revitalization planning", is a major strategic initiative to thoroughly implement the scientific concept of development, speed up transformation of economic development pattern, promote steel industry restructuring, optimization and upgrading, but also a useful exploration and try in further enhancing the concentration of domestic steel industry and speeding up promoting steel enterprise to achieve trans-regional mergers and restructuring, which is of great significance to improve the overall quality and market competitiveness of two enterprises and promote healthy development of local economy and the steel industry in China.

Through this reorganization, the overall production capacity and overall strength of Shougang will be further enhanced; speeding up achieving the overall development strategy and regional expansion plan of Shougang also helps Tonghua Iron & Steel Group to weed out backward production capacity, optimize product structure, upgrade equipment, technology and management level, and further enhance capacity for sustainable development, so as to realize the complementary advantages and mutual benefits.