China Lesso Announces 2019 Interim Results

Revenue and profit attributable to the owners of the company rose by 6.6% and 21.4% year on year respectively

 Results highlights:

-     The Group’s revenue rose steadily by 6.6% year on year to RMB11,137 million

-     Gross profit rose by 17.6% year on year to RMB3,200 million, which was attributable to economies of scale, increased production capacity and sound cost control

-     Profit attributable to the owners of the Company increased by 21.4% year on year to RMB1,264 million. Basic earnings per share was RMB0.41, increased by 20.6% on a year-on-year basis

-     Benefited from the steadily increasing demand from the Chinese construction industry and the demand from urbanisation redevelopment and the projects of rural water supply and drainage systems construction, sales volume of plastic piping systems increased by 2.5% year on year to 1,009,853 tonnes and the revenue of plastic piping systems increased by 7.1% year on year to RMB10,067 million

-     The Board of Directors announced payment of an interim dividend of HK12 cents per share

(26 August 2019, Hong Kong) – China Lesso Group Holdings Limited (“China Lesso” or the “Group”, HKEx stock code: 2128), a leading large-scale industrial group making building materials and interior decoration products in mainland China, today announced its interim results for the six months ended 30 June 2019 (the “Period”).

In the first half of 2019, the Group continued to consolidate the plastic piping systems business, and actively develop the business of building materials and interior decoration as well as the environmental protection business at the same time, in order to broaden the revenue base. Benefitting from the steady growth in China’s economy and demand for infrastructure construction, China Lesso saw its revenue increased by 6.6% year on year to RMB11,137 million. Gross profit rose by 17.6% year on year to RMB3,200 million on the back of the Group’s economies of scale, continued expansion of production capacity of its plants and effective strategy in procurement of raw materials. Gross profit margin rose to 28.7%. Profit attributable to owners of the Company increased by 21.4% year on year to RMB1,264 million. Basic earnings per share increased by 20.6% year on year to RMB0.41. The Board of Directors announced payment of an interim dividend of HK12 cents per share (First half of 2018: HK 10 cents per share).

The plastic piping systems business is the mainstay operation of the Group. During the Period, the revenue from the plastic piping systems business increased by 7.1% year on year to RMB10,067 million, accounted for 90.4% of the Group’s total revenue. However, the progress of certain construction projects of the Group’s clients was affected by severe weather in the coastal regions of Southern China. This restrained the growth in the plastic piping systems business. As a result, total sales volume at this business unit rose by 2.5% to 1,009,853 tonnes on a year-on- year basis. Despite a slight increase in the average costs of raw materials, the Group strived to maintain its gross profit margin at a reasonable and stable level by effectively controlling the costs of raw materials and production through economies of scale, massive procurement from raw materials suppliers and other measures. The gross profit margin improved to 29.4%.

The Group has been expanding its production capacity according to its development and actual needs in order to meet market demand. During the Period, the Group actively enhanced its standards in automatic production and smart production, and strived for full mechanization in the production of pipe products, so as to improve the overall production capacity, quality and efficiency in fulfilling the market demand. In the first half of 2019, the Group’s annual designed capacity for the production of plastic pipes and pipe fittings expanded to 2.69 million tonnes from 2.62 million tonnes in 2018, with a capacity utilisation rate of 80.7%.

In order to grasp the opportunity in China’s “Belt and Road Initiative”, the Group gave its nationwide network of production bases across China full play and actively sought prospective business partners. In May 2019, the Group signed a strategic partnership agreement with Xinjiang Ba Steel International Trade Co., Ltd. to jointly develop the markets of Central Asia and Xinjiang. This enabled the Group to sell its products to Central Asia in the future, increase its brand awareness there and develop a new growth driver of sales.

Regarding the business of building materials and interior decoration products, the new type of urbanisation and projects of redevelopment of old towns continued to boost the demand for refined decoration and redecoration, thereby driving up the performance of the business of building materials and interior decoration products. The business recorded a revenue of RMB572 million, which accounted for 5.1% of the Group’s total revenue.

To cope with the Chinese government’s environmental protection initiatives, the Group has been developing environmental protection business. The Group actively capitalised on municipal projects in various fields by tapping the demand for plastic pipes and pipe fittings. This will enable synergy between the Group’s environmental protection business and its plastic piping systems business for the long term. During the Period, the environmental protection business steadily developed, and generated income of RMB151 million.

To capitalise on the Chinese government’s “Belt and Road Initiative”, the Group develops a business named “Lesso Home” with the aim of bringing “One-Stop Specialised Market for Home Furnishing Products” to the overseas markets. Lesso Home aims to build a multinational platform for Chinese manufacturers of home furnishings, building materials and other consumer products to showcase their products and facilitate the distribution and retailing of such products. Lesso Home will also provide ancillary services, including marketing and branding. During the reporting period, “Lesso Home” recorded a revenue of RMB137 million.

Mr. Wong Luen Hei, Chairman and Executive Director of the Group, said, “In the future, the Group will continue to enhance its core competitiveness by actively introducing smart technology into its production plants and updating the equipment there, in order to expand the production capacity and raise the production efficiency. The Group will also continue to step up its effort to innovate and conduct research and development, striving to expand the scope of applications of plastic pipes and pipe fittings to increase product sales, thereby maintaining its market leadership. In addition, the Group will proactively seize the opportunity brought by the new type of urbanisation and the projects of redevelopment of old towns, maintain growth in revenue at the business of building materials and interior decoration products, and enable the business of building materials and interior decoration products to achieve synergy with its businesses of other product lines. The Group will endeavour to develop a business of treating hazardous and solid wastes and actively explore opportunities for mergers and acquisitions while maintaining steady development of the existing environmental protection business. By further exploring its overseas market business, the Group is confident that the “Lesso Home” business will become another growth driver for the Group in the long run.”